The Budget -

As expected the superannuation industry has been targeted with this year's federal budget with the federal government aiming to save around $4.2 billion over the following 4 years by making changes to salary sacrificing and co-contribution arrangements. In short-

• the government co-contribution will be temporarily reduced with the reduction in the matching rate from 150 percent to 100 percent for contributions made for the 2009/10, 2010/11 and 2011/12 income years. It is intended that these arrangements are only temporary and that co-contributions be gradually increased back up to $1.25 for each $1 contributed to a maximum of $1,250 in the 2012/13 and 2013/14 financial years and back to $1.50 for each $1 contributed to a maximum $1,500 in 2014/15 and onwards.

• Currently concessional contribution caps stand at $100,000 for those aged 50 and above and $50,000 for under age 50. Under budget changes commencing 1 July 2009 concessional caps will be halved to $50,000 for those over 50 and $25,000 for those under 50. The transitional arrangement ending 30 June 2012 will now see all concessional contributions capped to $25,000.

• Back in February 2009 the government suspended the minimum draw down requirement for the second half of the 2008-09 financial year resulting in a 50% reduction on pension payments from superannuation. As per the budget this halving of the minimum amount payable from such pensions will be extended for the 2009/10 year.

• There was much pre budget speculation however a number highly anticipated changes did not eventuate including changes to the non concessional contributions cap which continues to stand at $150,000 per annum or up to $450,000 for those under age 65 using the 3 year averaging provision, the removal of the transition to retirement pension which continues to act as tax effective strategy for those who qualify, and changes to the tax free pension and lump sum draw down for those who have reached age 60.

Other Recent News -

• The Australian Taxation office has backed down on their draft ATO ruling in November that extended payment of the 9% superannuation guarantee levy to overtime and other allowances. The ATO stated employees were not eligible to receive superannuation on overtime earnings because the concept of salary and wages paid in the 'ordinary hours of work' did not extend to overtime.

• From 1 July 2009 employers must show salary sacrifice contributions on the employees PAYG summary which will affect the individuals ability to qualify for benefits including the self-employed contribution (10% test) and the government co-contribution.

Excess Contributions Tax-

• The Tax Office has urged individuals to assess superannuation contributions in the current financial year to avoid breaching contribution caps. The Tax Office has identified around 24,000 cases with individuals being notified in writing in May via excess contribution tax assessments for the 2007/08 year. For the 2007-08 and 2008-09 financial year the concessional contribution cap is $50,000 per person and for those aged 50 years and over the cap is $100,000 with the non concessional cap being $150,000 per person and for people under age 65 for any part of a financial year being able to contribute up to $450,000 over 3 years. Note that excessive contributions are taxed at 31.5% and excess non concessional contributions are taxed at 46.5%.

• There are a number of options available to make payment of excess contributions tax being
• pay the tax yourself without drawing on your super,
• pay the tax yourself and use the voluntary release authority to ask your super fund to release the money to you,
• use the voluntary release authority to instruct your fund to pay the money to the ATO on your behalf,
• pay using a combination of these options.

• Contributions can be disregarded or reallocated in special circumstances. You may apply to have all or part of your contributions disregarded or reallocated to another financial year. To do so you must apply within 60 days of receiving an excess contributions tax assessment,