Don’t want to breach the new $25,000 concessional superannuation contribution cap?
Make sure your employer understands the maximum superannuation contribution base rules. For those who are on higher salary levels the concessional cap of $25,000 will be relatively easily breached if not reviewed appropriately.
The maximum superannuation contribution base is used to determine the maximum Superannuation Guarantee contributions than an employer is required to make under super laws. The maximum superannuation contribution base for the 2017/2018 year is $52,760 per quarter (entitlement is assessed quarterly) or the equivalent of $211,040 annually.
What this actually means is that an employer only has to contribute 9.5% superannuation guarantee on the maximum of $52,760 in salary per quarter – providing $5012.20 or $20,048.80 per annum. Clearly this amount is less than the $25,000 cap. The employer does not legally have to contribute super guarantee on salary greater than $52,760 per quarter, however many do, which may result in breaches due to the lower cap.
If you want to contribute more up to the cap then you can either salary sacrifice or make a personal concessional contribution, bearing in mind the required paper work.
Breaching the cap has the following consequences: the excess contributions are taxed at marginal tax rates with a 15% tax offset (rebate); and when the breach occurs, you also become liable to pay an excess concessional contribution charge which is basically an interest charge on the net tax payable (after offset).
In light of the above it may also be prudent to review employment remuneration contracts to determine whether you have an overall remuneration package that is either inclusive or exclusive of superannuation guarantee.
For professional advice about your personal circumstances please contact one of the team in our Business & Personal Advisory (BPA) division of WLF Accounting & Advisory.