The new rules allowing individuals to make tax-deductible voluntary superannuation contributions introduced as part of the super reforms have allowed SMSF members to overcome the inequitable and limiting nature of salary sacrifice arrangements, according to the SMSF Association.
The professional body emphasised the new rules effectively gave all superannuants the same ability to make voluntary contributions if they chose to do so rather than having to rely upon an employment situation where salary sacrificing arrangements to channel funds into retirement savings accounts were present.
“Some employers choose not to allow their employees to salary sacrifice, so this decision by the government does give employees greater flexibility if they want to contribute more money into their superannuation up to the $25,000 cap,” SMSF Association chief executive John Maroney said.
“For an employee on $100,000 who is getting a superannuation guarantee payment of $9500 annually, it will provide the option of being able to contribute another $15,500 to superannuation at the concessional tax rate.”
Maroney pointed out the increased flexibility in the retirement savings system could result in individuals choosing to make their own personal contributions, even if the possibility of putting in place a salary sacrifice arrangement was available to them.
“This gives individuals far more flexibility over the timing and control of their contributions up to the $25,000 cap, as well as being able to utilise catch-up contributions once they begin.”
Further, he said the new ability to make tax-deductible personal contributions could give individuals greater peace of mind, allowing them to avoid potentially detrimental arrangements and employers who fail to pay or are late in paying contributions.