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ECT laws a boost to contributions strategy

New legislation introduced recently by the federal government dealing with excess concessional contributions tax (ECT) should encourage SMSF trustees to revise their strategies, according to an SMSF expert.

The new rules dictate any excess concessional contributions will now be taxed at the individual’s marginal tax rate rather than the top marginal tax rate as had previously been the case.

Considering SMSF trustees would now be provided with an excess contributions assessment with tax levied at the individual’s marginal rate, there would be a distinct advantage for taxpayers not in the top marginal tax bracket to breach the cap and boost their retirement savings, SMSF Strategies principal Grant Abbott told selfmanagedsuper.

“The sweet spot will be for those SMSF trustees who are earning between $80,000 and $180,000 whose marginal tax rate is 37 per cent,” Abbott said.

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