Superannuation fund members with high incomes may find their superannuation guarantee (SG) contributions have come close to filling their concessional contribution (CC) cap in the coming financial year and have been warned to plan accordingly ahead of time.
Smarter SMSF technical and education manager Tim Miller said while the SG rate will rise from 10.5 per cent to 11 per cent, the maximum super contribution base will also rise in the coming financial year and may impact CC caps and the Division 293 threshold.
“The maximum contribution base is a guide for employers to identify where their SG obligations cease and based on an income per quarter amount is the maximum on which they have to make SG contributions,” Miller said during an online briefing today.
“This contribution base has been indexed annually and next financial year will be $62,270 of income per quarter, which gives us an annual income of $249,080.
“It creates an issue because when we look at that quarterly income and multiply it by the 11 per cent factor of SG, it gives us [a quarterly contribution of $6850 and] an annual SG contribution of $27,400, which is close to the current concessional contribution cap limit of $27,500.
“This suggests anyone operating under the maximum contribution base can’t have further contributions going in without triggering an excess concessional contribution and when we go to 11.5 per cent, then you’re automatically going to be over the contribution cap as well.”
He added the total annual income figure was also very close to the Division 293 threshold of $250,000 and any further indexation of the maximum contribution base will result in high-income fund members passing the threshold and being levied with a higher tax.
It was unlikely the Division 293 threshold would be raised or the maximum contribution base fixed at $250,000, but individuals with multiple employers could request that not all of them make SG contributions for up to four quarters, he said.
“The individual must apply so that they get an exemption for having that shortfall [from their employer], but here’s the catch: you must apply 60 days before the first quarter of the exemption that you seek,” he said.
“Given these thresholds come in on 1 July, we are well past the 60-day period for anyone that wanted to commence this exemption from 1 July, so the first quarter that anyone could actually apply for is 1 October through to 31 December and those applications would need to be received by 2 August.
“We are highlighting a definite future issue that is going to apply to many high-income earners because there is an excess contribution and Division 293 issue and we need to make sure that people are aware of the actions they need to take to avoid the additional tax liabilities.”
