Superannuation contribution tax changes
Changes to Superannuation Legislation
On 7 December 2006, the Federal Government introduced to Parliament changes to the taxation treatment of superannuation payments and superannuation contributions. These changes are expected to be legislated in March to take effect from 1 July this year. These changes are significant and it is important for you to understand potential impacts.
Summary of the changes (Word doc)
Concessional contribution limits
Of specific importance for University staff members are the proposed superannuation contribution changes. Currently, employer superannuation contributions (including pre-tax salary sacrifice contributions) are subject to age-based maximum deductible contribution limits. However, since the University is a non-taxed entity, these aged-based limits have not applied.
From July this year, the age-based limits will be abolished and replaced with a concessional contribution limit of $50,000 per annum (a 5 year transition period will apply to provide for a $100,000 limit per annum for individuals who turn 50). Concessional superannuation contributions are those paid from pre-tax income and include employer contributions and salary sacrifice contributions. Concessional contributions are taxed at 15 percent.
For University staff members, one of the major differences from July 2007 will be that concessional contribution limits are assessed by superannuation funds not the University. This means staff members will become subject to maximum tax concessional contribution limits.
Superannuation contributions over and above the contribution limit caps will be taxed at the top marginal tax rate plus Medicare levy. The caps will apply to all concessional contributions including salary sacrifice. However, it is expected there will be exemptions for defined benefit superannuation contributions.
Making a decision for your personal situation
We realise superannuation is complicated. However, only licensed financial advisors are permitted by law to give you personal financial advice. This means University staff members are unable to advise you on how much you should salary sacrifice, and nor can they recommend a financial advisor. For more information about financial planners you can refer to Financial Planners of Australia.
As you can appreciate, the University has a large number of staff members and whilst we believe it is important for you to be aware of these changes, we are not in a position to provide you with individual counseling, calculations etc.
We have attached a simple calculator (Excel spreadsheet) which you can use to give you an idea of the impact of salary-sacrifice on your take home pay. It should be noted that this calculator provides an estimate only; it is not designed to cater for all circumstances.
To make the right choice for your personal situation we recommend you:
- Attend a Seminar - The July 2007 tax changes are significant. As a result it is expected that both UniSuper and the State Superannuation plans will schedule seminars explaining the changes.
- Check the following websites for seminar details:
UniSuper
State Super Schemes (SSS or SASS) - Consult a financial advisor – for example, UniSuper has a panel of advisors who are familiar with university sector superannuation check their website for more details.
- Consider the level of your superannuation contributions – there is a window of opportunity to 30 June 2007 during which salary sacrifice contributions are not limited – you might like to consider these opportunities especially if you are considering retirement or voluntary redundancy.
Nearing retirement?
It is particularly important that you explore the impact of these changes on your superannuation.
Making voluntary contributions
If you wish to make a salary sacrifice superannuation contribution you need to complete a UniSuper Regular Voluntary Contribution Election.
You need to complete this form even if you are a State Super member (SSS & SASS) as additional contributions for State Super plans are also directed to UniSuper.
Make sure that you select Before-tax pay on page 2. It should be noted that the Payroll system can only accept a dollar amount nomination, meaning that Payroll cannot process a percentage of pay.
Forward your completed form to:
Payroll Officer, HR Service Centre, 1st floor (level 3) Margaret Telfer.