One of the most far-reaching changes announced in the 2009-10 Federal Budget was that the concessional contributions cap will be reduced from $50,000 to $25,000 per annum with effect from 1 July 2009. The transitional concessional contributions cap (which is applicable to individuals aged 50 and over) will be reduced to $50,000 per annum.
The annual cap on non-concessional contributions will remain at $150,000 per annum and will be set at six times the concessional cap in future years.
|
New Superannuation Contribution Limits
|
||||
|
Concessional
(deductible) limit |
Transitional Concessional
(deductible) limit |
|||
| Financial Year |
Old
|
New
|
Old
|
New
|
| 2008/09 |
$50,000
|
–
|
$100,000
|
–
|
| 2009/10 |
$55,000
|
$25,000
|
$100,000
|
$50,000
|
| 2010/11 |
$55,000
|
$25,000
|
$100,000
|
$50,000
|
| 2011/12 |
$60,000
|
$25,000
|
$100,000
|
$50,000
|
| 2012/13 |
$60,000
|
$25,000
|
$60,000
|
$25,000
|
| 2013/14 |
$60,000
|
$25,000
|
$60,000
|
$25,000
|
| Concessional contribution caps have been calculated as the 2009-10 concessional cap indexed to AWOTE at 4% pa, rounded down to the nearest $5,000 | ||||
These changes could have a significant impact on many tax and investment strategies. Those people who are currently making large salary sacrifice contributions will need to ensure that they do not breach the new limits during the 2009-10 financial year. Excess concessional contributions are subject to tax of 31.5% plus 15% contributions tax and they also count towards an individual’s non-concessional contributions cap. It is therefore vital to get the numbers right.
For younger workers who are only receiving 9% superannuation guarantee contributions from their employer, the need to start making additional contributions is now greater than ever because the ability to make large contributions closer to retirement has been severely curtailed.
Transition to Retirement (TTR) Pensions
While there were no specific changes announced regarding TTR income streams, the new contribution caps might impact on individuals who are making large salary sacrifice contributions and drawing a TTR pension.
People aged over 50 who are currently undertaking TTR strategies and who make concessional contributions of $50,000 or less per annum will not be impacted by the contribution cap change. But those who are making concessional contributions in excess of $50,000 will need to review their strategy to ensure it is re-balanced for the post 1 July 2009 rules. This might require:
- reducing the amount of their salary sacrifice contributions;
- reducing the income they take as a TTR pension;
- rolling some of their TTR pensionn back into accumulation phase; or
- perhaps contributing surplus income as personal after-tax contributions.
Minimum pension drawdown rules extended
The Federal Budget has confirmed that the 50% reduction in minimum annual pension payments, first announced in February 2009, will be extended into the 2009-10 financial year. The reduction applies to account-based, allocated and market-linked (term allocated) pensions and annuities.
Government Co-contributions cut
The maximum Government co-contribution has been temporarily reduced from $1,500 per annum to $1,000 per annum. This will apply to eligible personal superannuation contributions made on or after 1 July 2009. At the end of 2011-12, the co-contribution matching rate will be gradually increased until it returns to the 150% level in 2014-15.
The lower and upper co-contribution thresholds will not be impacted and will continue to be indexed to average weekly earnings.
Personal income tax rates reduced
The new personal income tax thresholds for the 2009-10 will be as follows. The rates are similar to those that applied in 2008-09 except that the income threshold for the 30% tax rate has been increased from $34,000 to $35,000 and the 40% tax rate has been reduced to 38%.
|
Personal income tax rates
|
||||
|
Current Rates
|
From 1 July 2009
|
|||
|
Income $
|
%
|
Income $
|
%
|
|
|
0 – 6,000
|
0
|
0 – 6,000
|
0
|
|
|
6,001 – 34,000
|
15
|
6,001 – 35,000
|
15
|
|
|
34,001 – 80,000
|
30
|
35,001 – 80,000
|
30
|
|
|
80,001 – 150,000
|
40
|
80,001 – 180,000
|
38
|
|
|
180,000 +
|
45
|
180,000 + |
45
|
|
Warning: The information contained on this page is based on our interpretation of the Federal Budget Statements and accompanying documents. While all care has been taken in the preparation of this document (using sources believed to be reliable and accurate), we do not accept responsibility for any loss suffered by any person arising from reliance on this information. This document is not financial product advice and does not take into account any individual’s objectives, financial situation or needs.