Q. Can you please confirm how much I am allowed to contribute to Superannuation via my employer as Salary Sacrifice contributions as I hear they have recently changed. I am 49 years of age.

A. Each year various Superannuation thresholds or limits are meant to change to reflect changes in Average Weekly Ordinary Time earnings (AWOTE). However in recent years indexation was suspended.  The ATO have recently announced the recommencement of the indexation of Superannuation contribution caps effective from 1 July 2014.

If you were under 49 at 30 June 2014, the Concessional Contributions Cap (CCC)  increases from $25,000 to $30,000.  CCC contributions include Superannuation Guarantee Contributions, Salary Sacrifice Contributions and Personal Deductible Contributions for eligible self-employed.

As you are 49, from 1 July 2014 your CCC has increased to $35,000 from $25,000.  For those 59 and over at 30 June 2014 the cap remains unchanged at $35,000.

Be careful with your Concessional Contributions Cap.  There are important changes to the percentage of Superannuation Guarantee Contributions (SGC) and SGC eligible income limits so your employer will be contributing more into your Super next Financial year. Effective 1 July 2014, SGC will increase from 9.25% to 9.5%  SGC must also be paid on income of up to  $49,430 per quarter.  Previously the limit was $48,040.

There are also changes to Non-concessional Contributions Caps (NCC).  NCC are personal contributions made where no tax deduction is claimed and hence are often referred to as after tax contributions. From 1 July 2014 the NCC has increased from $150,000 per financial year to $180,000.  The bring forward rule permits those under 65 to contribute $540,000 in a lump sum every 3 years.  Previously this amount was $450,000.  Those who have previously triggered the bring forward rule at the lower cap are limited to that cap until the expiry of the 3 year period.

In summary there are substantial changes and opportunity for those under 59 to contribute more to Superannuation pre-tax and for everyone to contribute more after tax contributions. Review your current Employer contributions to ensure you are aware of the impact of the changes.  Optimise your position to take advantage of the revised caps as much as is practical. Note all changes take effect from 1 July 2014 and current limits remain in place for the duration of this current financial year.

 

Follow Andrew on Twitter @AndrewHeavenFP.  This article was originally published in The Australian.