Posted on by David Sly

Pay increase may trigger unexpected superannuation tax bite

Flinders University’s 1.7% pay increase that is currently being processed may have an unexpected impact on some people’s superannuation contributions, pushing them beyond the pre-tax cap that was adjusted in July, 2017.

Super can be a tax-effective way to save for retirement, but staff should be aware that limits exist to concessional contributions. If you choose to contribute more than government-mandated limits to concessional contributions, you may be charged extra tax.

Concessional contributions are taxed at 15% and include employer and salary sacrifice contributions. The concessional contributions cap for members is $25,000 for the 2018-19 financial year (with notional amounts applying for Defined Benefit Division (DBD) members).

Any contribution exceeding the cap is taxed at your marginal tax rate and the Australian Tax Office (ATO) levies an interest charge.

Before 1 July 2017, the concessional contributions cap was higher – $30,000 to $35,000, depending on your age. With the cap now at $25,000 for everyone, a growing number of people might unexpectedly exceed their concessional contributions cap and will receive a letter from the ATO seeking the extra tax payment, or a refund of a portion of the contributions.

Eligible members of UniSuper’s DBD may only obtain a refund if they have made concessional contributions to a built-in accumulation component in their fund.

Most UniSuper members will not exceed the cap. However, if you have had a change to your financial circumstances, such as a pay rise, it pays to keep track of your super contributions.

Tips to take control of your contributions:

  • Learn more: Read detailed information about caps at UniSuper’s Caps on super contributions Go to unisuper.com.au/caps.
  • Keep track of your contributions: Check your concessional contributions with your super fund. If you’re a UniSuper member, log in to your account see how you’re tracking.
  • Get professional advice: Sometimes it’s easier to talk face-to-face with a professional. If you’re a UniSuper member, you can make an appointment to see your on-campus consultant at com.au/campusbookings.

If you have any questions about your super, you can also contact UniSuper on 1800 823 842.

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