contributory stage
Overview
With the removal of reasonable benefit limits from 1/7/2007, there has been extensive changes to the contribution regime to limit overuse of tax advantaged superannuation by wealthy individuals. Importantly, caps have been introduced on non-concessional (undeducted) contributions beside concessional (tax deductible) contributions. Penalty tax applies if the caps are exceeded. Self-employed people are now treated more equitably, including having access for Government co-contributions. From a computational point of view, we still have the fundamental computational task of evaluating the level of assets that need to be accumulated and how this will be funded.
Brief Regulatory Summary
Contributions are classified into "concessional" and "non-concessional" contributions.
The concessional contributions:
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tax at 15% in the super fund (or top marginal rate if no TFN) |
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a limit of $25,000 per individual applies in the 2009/10, 2010/11 and 2011/12 financial years and a limit of $50,000 applies in the 2007/08 and 2008/09 financial years. These limits are indexed in line with AWOTE in $5,000 increments |
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for those aged 50 and above, there is a $50,000 non indexed transitional limit for the 2009/10, 2010/11 and 2011/12 financial years, and a $100,000 non indexed transitional limit for the 2007/08 and 2008/09 financial years |
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amounts allocated (not distributed or converted) from reserves count towards cap - grossed up by 1.176 factor |
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excess concessional contribution tax is 31.5% and counts towards the non-concessional cap |
The non-concessional contributions:
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are limited to $150,000, indexed in line with AWOTE in $5,000 increments |
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for those under 65 a three year "bring forward" basis can apply |
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the super fund must have the member TFN to accept non-concessional contributions |
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small business capital rollover, co-contributions do not count towards cap up to $1m (indexed) lifetime limit |
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non taxable portion of overseas transfers count per cap |
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contributions in excess of cap taxed at top marginal rate plus medicare i.e. 46.5% |
Other items:
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there were special transitional provisions for the period 10 May 2006 and 30 June 2007 |
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to have a contribution cap after age 65 the work test applies - individual must be gainfully employed for 40 hours in a 30 consecutive day period |
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non-concessional contributions after 5 April 2007 cannot be split |
What Level of Assets is Required?
People tend to underestimate the number of years a pension will be needed, especially if it must be paid while at least one of the two people are alive. We have a survivorship calculator to assist with this task.
There is a second calculator that shows a target lump sum at retirement once a level of pension and level of yearly increase (e.g. CPI) is nominated. Often a higher dollar target is aimed at since most people would not like a 50% chance of running out of money.
Finally there is a calculator to investigate the practicality of the retirement balance.