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The changing world of superannuation tax

As a general rule, superannuation funds pay tax at the concessional tax rate of 15 per cent. Essentially, this means that the employer’s contributions on behalf of employees are taxed at this rate as is the taxable income of superannuation funds. There are many issues to be aware of when it comes to tax which is why it is important to do the research and get assistance where you do not understand the technical issues.

1. Superannuation guarantee increasing

Employers are required by law to deposit nine per cent of an employee’s remuneration into a superannuation fund. This is called the Superannuation Guarantee. In the 2010 federal Budget, and again following the Henry Tax Review, the Government flagged increasing the superannuation guarantee rate to 12 per cent between 1 July 2013 and 1 July 2019. In addition, the age limit for the superannuation guarantee will be raised to 75 (from 70 years) on 1 July 2013.

2. Know the contribution caps

Tax deductible contributions to superannuation funds are limited by a so-called ‘concessional cap’. At the time of writing, for the 2010 to 2011 financial year, the concessional cap for people aged under 50 is $25,000. According to the Australian Tax Office (ATO), the cap will be indexed annually to average weekly ordinary time earnings (AWOTE) and rounded down to the nearest multiple of $5000.

The ‘transitional concessional cap’, which is for people who are aged 50 or older, is $50,000 per financial year. This amount is not indexed and is available until 30 June 2012, although the Government is looking at making this permanent.

3. Be careful with extra amounts

The ATO says any amount put into a super fund over these concessional caps will be taxed at 31.5 per cent; and this is in addition to the initial 15 per cent paid by the super fund!

The ATO says these caps apply to all concessional contributions, including the super guarantee, any salary sacrificed amount, and “any amount you are allowed as a personal super deduction in your income tax return”.

4. Increased superannuation contributions tax rebate for low-income earners

Another change flagged by the government following the 2010 federal Budget related to the superannuation contributions tax rebate for low-income earners. Individuals on adjusted taxable incomes of up to $37,000 will receive a ‘free’ superannuation contribution of up to $500. The ATO says the amount payable will be calculated by applying a 15 per cent matching rate to concessional contributions made by or for individuals. If passed into law, the changes would come into effect for the year ending 30 June 2013.

5. Do your homework

Doing the homework on these issues is important to ensure that you don’t suffer penalty tax rates. Visit for more information. If your circumstances are complicated, you may also consider speaking with a trusted financial adviser who can help with money matters. Finally, ensure you keep up to date with changes to superannuation tax. 

Need help navigating your superfund choices? Find solutions here.

Interested in making more from your super? Explore the option of salary sacrificing here.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Tuesday, October 19, 2010

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