I am in the contract transport business. My contract is with one major transport company (or prime contractor). If I wished to contribute $100,000 to super pre tax in the 08/09 financial year, is this possible?
The short answer is YES!
Now I’d like you to imagine the end of those political ads on TV, and picture me hastily adding in a super fast voice, running all my words together, “YES is subject to terms and conditions, nasty detail and fine print that could land you paying 46.5% tax. We guarantee nothing”!!
The fine print…Transitional concessional contributions cap and the new lower limit
A transitional concessional contributions cap of $100,000 per person applies for FY2008/2009 for individuals aged 50 or over at any time during this financial year. So YES assumes that you are over age 50.
The following example illustrates how the old and new caps apply:
Jeremy turns 50 on 5 January 2009 (i.e. in the 2008/2009 financial year). At this time, he becomes entitled to the higher transitional cap of $100,000. His annual concessional contributions caps for the years 2007/2008 to 2009/2010 are set out in the table below.
| Financial year
|Annual concessional contributions cap|| $50,000
(under age 50)
(over age 50)
(over age 50,
Now remember that the over 50s $100,000 cap includes employer superannuation guarantee contributions (generally 9% of wage) and pre-tax salary sacrifice contributions. If you are a self employed sole trader, then the total amount of super contributions that you can claim as a tax deduction is the $100,000.
So YES, you have until 30 June 2009 to use the $100,000 cap for employer contributions (including salary sacrifice) and personal tax deductible contributions if you are over 50.
YES does not apply if you are under age 50 this financial year. If you are under 50, your concessional contribution cap is $50,000.
Bear in mind that if you are an employee of a company that you do not own, it could be very difficult to suddenly arrange with your employer to salary sacrifice June 2009’s pay into super and maximise the $100,000 opportunity. That is, you’d need to be on around $1.1 million pa!
If you are employed by your own company and there’s the cash in the company bank account, then YES, you could put up to $100,000 into super before 30 June 2009. Just be careful not to breach the total cap for the year. If you’ve already put $10,000 into super this year, then any more than an extra $90,000 will attract penalty tax for breaching the cap.
If you are truly a self employed contractor, responsible for your own ABN, GST, paying tax and get no super payments for your contract work, then YES you could put $100,000 into super before 30 June 2009, and claim the entire amount as a tax deduction for the financial year.
Breaching the cap
Where a person’s concessional contributions have exceeded the cap in a financial year, the amount in excess of the cap is subject to excess concessional contributions tax. This tax is assessed to the taxpayer at the rate of 31.5% (In addition to 15% tax paid in the fund) and can be paid by the person or the fund.
So stuffing YES up means paying 46.5% tax altogether.
I strongly recommend you have a quick chat to your financial adviser, business adviser and/or accountant. Your application of this $100,000 contribution is different depending on your contractor business set up.
By Jeremy Gillman-Wells, Financial Planner, Bentham Financial Group
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The information in this article does not take into account your objectives, financial situation or needs. Therefore, before acting on the information, you should consider its appropriateness to your personal circumstances. Although this information was obtained from sources considered to be reliable, it is not guaranteed to be accurate or complete. The information is current as at 13 May 2009 and may change over time.