No More Letting Go of The Past
In superannuation, letting go of the past can be a bad thing. The Government has rightly moved to stop it, with another fantastic super change coming into effect from the 1st July 2019.
To understand it, let’s first have a quick recap of concessional super contributions.
A concessional contribution is paid from your before-tax income and can come from employer contributions, salary sacrificing or tax-deductible contributions that your employee makes. Concessional contributions are the main part of most people’s super savings and are usually taxed at 15%. From the 2017/18 financial year, employees have been allowed to make $25,000 per year in concessional tax contributions. Anything above that is taxed at their marginal tax rate.
Previously, the ATO never allowed people to carry over any shortfalls. That’s now changed. If an employee contributes less than the cap, they can carry over that difference to make a higher contribution for up to 5 years into the future.
So how will that affect you?
For many employees, their income fluctuates. Maternity leave, bonuses, travel, varying shifts and large expenses can all affect the amount they have available to contribute to their superannuation. The recent change to the law allows them to take advantage of those leaner years and contribute more when their income returns to normal. Those additional contributions will primarily come from salary sacrificing and personal deductible contributions from their pre-tax income. We expect you’ll receive more demand for these arrangements from your employees so it’s important to work with your accountant to ensure they’re implemented correctly.
We also suggest pro-actively explaining the change to your employees to demonstrate that you care about their long-term well being and have a plan to transition them to new arrangements as easily as possible.
Call John Sciacca today for a no-obligation consultation on 07 3357 5553 or email firstname.lastname@example.org