Superannuation issues are some of the most important considerations that taxpayers should be aware of. One such issue is the danger of super contributions exceeding the contributions cap.
The contributions caps are $25,000 for taxpayers below 50 years of age and $50,000 those over 50. If the contributions that are claimed as deductible exceed these caps, then it is possible to pay almost 49 per cent tax on the excess contribution as a penalty for the breach.
To avoid being penalised, keep in mind that as a self-employed business owner, any super contribution that you make and wish to claim as a tax deduction is counted towards the cap. Last year a client made $25,000 in contributions to his fund and paid his $4,230 life insurance premium to another super fund. The life insurance payments were treated as a contribution; consequently, he exceeded the maximum contributions and was penalised $1,332.
To avoid paying the penalty; here are some things to help:
- If self employed, set up a direct debit to pay your contributions monthly. This will ensure your business can cashflow the payments and you will know the exact amount that will be paid in the financial year.
- Keep track of when your employer makes a superannuation guarantee payment. If they make it in July instead of June, this will count towards next year’s contributions.
- If you have multiple jobs, then it is possible that the superannuation guarantee contributions by each employer could total more than the cap. Ensure you know how much each employer is contributing.
Oculus are specialists in superannuation strategies. To have a personal consultation please contact us on 07 5536 3755.