A couple of weeks ago, the Australian Taxation Office (ATO) announced the key superannuation thresholds for 2014/15. It does this at this time of the year in accordance with the super and tax legislation. Finally, after seven years, the ATO announced that general concessional contributions cap would be increased from $25,000 to $30,000. For some superannuants, the other part of the announcement was even more important – the non-concessional cap would increase from $150,000 to $180,000 (set by legislation at six times the concessional cap).
Concessional contributions are, of course, the employer’s 9.25%, any amount you salary sacrifice, or if self-employed, amounts that you contribute and claim a tax deduction for. Non-concessional contributions are amounts that come from your own after tax dollars. If you are under 65, you can access the ‘bring forward rule’ and contribute three years’ worth in one year, meaning that under the new limit, up to $540,000 in one hit.
According to the ATO, the concessional caps for this and next year are as follows:
And the bad news?
Last Tuesday evening, when Peter and I on 2GB 873 interviewed him on radio 2GB, Senator Arthur Sinodinos claimed to not know anything about these increases. Admittedly, this was the night prior to him stepping down as Assistant Treasurer and the Minister responsible for Superannuation and I am sure he had other things on his mind. However, he clearly had no knowledge of the changes and answered a second question by re-iterating the Government’s pre-election promise.
What is the Government’s promise? According to their election policy released in September 2013, they have pledged to: “not make any unexpected detrimental changes to superannuation”. In simple terms, they have pledged not to hurt anyone in the super system unless they have already announced the change.
So where does an increase in the caps fit?
Well, these changes are currently law – they are provided for in the Income Tax Assessment Act 1997 (section 960-285), which says that the caps are to be indexed in line with increases in average weekly ordinary time earnings, in increments of $5,000 rounded down. Deferring a legislated increase must surely be considered as “detrimental” and “unexpected” – as to do so would see the caps lose value in real dollar terms.
The trouble is there is form on this. For each of the last three years, the Government has deferred this increase in the Budget as revenue saving (more money in super reduces the overall taxation take). Admittedly it was a government of a different hue, however, it is the same bureaucrats in Treasury who advise them.
The Budget is due to be handed down on May 13, and I wouldn’t be surprised if deferral of the increase is again on the agenda. While we will be able to argue that it is a breach of their pre-election pledge, it might be a good idea to use your voice and tell your local MP now that you would view it as an “unexpected detrimental change”.
Important: 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. Consider the appropriateness of the information in regards to your circumstances.
Also in the Switzer Super Report:
- Peter Switzer – What’s wrong with our stock market?
- Peter Switzer – From the top – Gerry Harvey
- Rudi Filapek-Vandyck – Buy, Sell, Hold – what the brokers say
- James Dunn – Five education and training must-have companies
- Penny Pryor – Shortlisted – Toll Holdings and property picks
- Gary Stone – Primary Health primed for breakout
- Staff Reporter – Property revival heads into second year
