Contact: John Randall
Deloitte
Partner
61-2-9322 7550

Contact: Vessa Playfair
Director Communications
02 9322 7137

Superannuation contributions made by employers above the age based limits prior to 1 July 2007 will be counted towards the undeducted contribution cap and possibly attract penalty rates of tax in a superannuation fund according to Deloitte Tax and Superannuation Partner, John Randall.

“Detail in the legislation is contrary to indications in the publications released by Treasury in May and September this year,” Mr Randall said.

“Employer contributions up to the age based limits are generally deductible, with the amount of contribution in excess of those limits being non-deductible to the employer.

“Before the reforms, these employer contributions - whether deductible or not - were subject to tax in the superannuation fund at the rate of 15 per cent.

“If the draft legislation is passed in its current form, those non-deductible contributions will count towards the $1,000,000 undeducted contribution limit and could be taxed at a rate of 46.5 per cent.

“Employees who are in a position to contribute up to the undeducted contribution cap this year and who have employer contributions made for them need to be conscious of the implications of the level of those employer contributions.

“If there are excessive contributions, the employee should give consideration to applying to the Commissioner of Taxation for a release of the excessive amounts.”