Is there a cap on your super contributions
If you have been reading the articles on this blog and other sites on Super Funds you have probably began to realize that it is a sweet deal. You can contribute towards your pension fund, get tax breaks on the money you save for your future, get contributions from your employer and even sacrifice your salary for extra super contributions that benefit both you and your employer. Not only that in many cases the government is willing to match every dollar you contribute towards your super fund.
It doesn’t take a rocket science to realize that the Government is trying its best to make saving for our retirement as attractive as possible. It is no surprise as we see the population of Australia and similar countries aging and people saving less and less. The Government wants you to save and is willing to pay you for the privilege. Pretty nice when someone pays you to do what’s good for you!
This might make you think, mmm, I have some extra cash could I throw it into my super fund and get the great deals the Government is offering. The answer is probably yes, up to a point. The idea is to help people who would otherwise find it very difficult to save and make sure they have enough for when they retire not to provide an easy ride to already wealthy people. Having said that the caps or limits the Government places on super contributions are rather generous and you will probably not have to struggle to keep within the Government cap on super contributions. It is also worth noting that these caps are only on the tax breaks and co-contributions, you can contribute as much as you want, you will just might end up paying more tax than you want to.
So after all that, what is the current concessional contributions cap?
For the 2007/2008 and 2008/2009 financial years the concessional contributions cap (more on what concessional contributions are on our blog) is $50,000 per person. This yearly cap is indexed annually to average weekly (ordinary) time earnings of $5,000.
Anything over this amount will be subject to extra tax.
If you are over 50 the cap increases from $50,000 to $100,000 per year. This allowance is planned to be maintained up to 2012. The logic behind this increase in the contribution cap is that people in their 50’s are probably doing their best to build up their retirement fund as quickly as possible and want their money to be invested as soon as possible.
If for any reason your planned contributions will be over and above your concessional contributions cap you should contact a financial planner that can help you to plan your contributions as tax efficiently as possible.