Until June 2009, Australians aged 50 years or over were permitted to make up to $100,000 a year in
But wait, the Federal Treasurer Mr Swan has announced that he has only deferred the over-50s for two years. What this supposedly means is that for the 2012/2013 and 2013/2014 years, the maximum amount of concessional contributions that anyone can make (and not be charged excess
From July 2014, the ATO is expected to have some whiz-bang online reporting facility that will make it easier to find out the size of your account balance at a certain date, to enable those with account balances of less than $500,000 to access the higher concessional cap from July 2014.
I have published my views on this website before but briefly I consider the delays in introducing the contribution rules unacceptable especially when the Government is implementing such an ill-conceived, unfair and simply bad policy. The proposed change to the contributions cap was always about politics, not policy and you can thank former Prime Minister Kevin Rudd and Treasurer
Do you believe Mr Swan when he says the over-50s concessional cap has been deferred, rather than removed? I don’t think I do based on Mr Swan’s track record of promising policy changes and then breaking his promises, or minimising the policy change, or deferring the policy, or freezing indexation for years on end.
Here’s why I don’t believe that the over-50s cap will return while Mr Swan is Treasurer:
- May 2009 Federal Budget:Halving of over-50s contributions cap from $100,000 to $50,000 taking effect from July 2009, with the over-50s cap reverting to $25,000 from 1 July 2012. Before the 2009 Budget changes were released, the Government had announced that the concessional cap of $50,000 was to be increased to $55,000 from July 2009. If the Government was sincere about only halving the before-tax limit, the concessional cap should really have been $27,500 from July 2009.Mr Swan not only halved the caps, he froze the indexation of the caps for the 2009/2010 year.
- Before the 2009 Budget changes were released, the Government had announced that the non-concessional (after-tax) contributions cap was to increase to $165,000 for the 2009/2010 year, and the bring-forward cap was to increase to $495,000 from $450,000. (If you take advantage of the bring-forward rules, then you can make up to three years of
- May 2010
- 2011/2012 Mid-year Economic and Fiscal Outlook: In November 2011, Mr Swan announced that the concessional caps would not be indexed until July 2014, further restricting the opportunity for Australians to contribute to super.
- 2012 Federal Budget: Effective from July 2012, Mr Swan has removed the over-50s concessional cap until at least July 2014.
Remember this: In June 2009, over-50s were permitted to make up to $100,000 a year in concessional contributions. At the end of June 2012, a mere three years later, the maximum amount that a person aged 50 years of over can contribute as concessional contributions (including compulsory
Thank you for the excellent article that clarified a few things for me.
However, as commented by Bernie, when can we expect this rubbish piece of legislation to be passed by parliament so we can plan for 2012-13 with more certainty?
It is also worth noting that this lesgislation does not impact on Swan or his mates – on both sides of parliament. I would not be contributing comments here or criticising the changes in the Super lesgislation if I was relying on the Tax payer for my income and my defined benefits plan.
A complication to consider in relation to the reduced concessional contribution cap for the over-50′s in 2012/13 is that (I believe) companies may pay the various concessional contributions into the super funds on a quarterly basis and thus (salary sacrifice) contributions during the last months of the 2011/12 financial year may not be paid into the super fund until early in the 2012/13 financial year, thus prematurely loading up concessional contributions for that year. This complicates the estimation of salary sacrifice amounts for the 2012/13 year. And….the legislation has not yet passed in parliament (ref ATO web site: Concessional Contribution Cap, over 50′s) so there are only the budged papers and your great site for guidance. Confusion reigns……
Trish,
Excellent work summarising the issues, call me simple, but is there no way that we (the over 50s) have a voice of influence. You are spot on, I’ve worked hard over the years getting qual/exp and I’m now getting the financial remuneration so these are the years I can contribute to my SMSF so I’m not reliant on the taxpayer to fund my retirement. I read somewhere that we (SMSF) make up 37% of the super market. Surely that is a powerful lobby group. Trish, are you able to provide any guidance how we lobby, is there a SMSF lobby group we can join, or do we just vote them out at the next election and hope the next lot don’t make it even worse! P.s. I had to contain my ‘rant’, but as my old ‘grandad’ used to say “it makes you wanna spit” Goo on ya Trish, all the best, Mike
I too am in my late 50s and have been struggling for the past 4 years to rebuild following the GFC, and at the same time put enough away for a half-decent retirement.
The 2012 loony-tunes budget was pretty much the last straw. I am now asking myself, why should I keep going to work every day pay more tax, and still end up with insufficient super.
I am probably better off retiring sometime prior to 1 July 2012, cashing out my super, and buying a nice principle place of residence on the beach as my only asset…and then put out my hand for a full pension.
Seems a lot better than working until I drop.
I am 67, still working and trying to salary sacrifice as much as I can to retire in two years time…
Ironic :=(
After this amazing bit of budget stupidity Labour should not be suprised at the treatment they will get from the over 50′s come the next election – Labour clearly does not have a stable and consistent super & retirement vision/strategy for Australia so its time to change the temporary employees (aka labour pollies) on the hill. Keep up the good work SuperGuide!
Why is this such a bad idea, only above average earners can take advantage of the $50k limit anyway.
You can still contribute $175,000 per year to super, so even if you are 60 you can put in over $1million before age 60 (with extra $300,000 in last year) which means a couple can add over $2 m between age 60 and 65 which is enough to be a self-funded retiree and have a very good income, all tax free. You just cannot get a tax deduction for more than $25,000 each year (and you need about the average income to make it worthwhile putting more than $25,000 anyway).
So you really can start quite late and still have a good tax-free income in retirement, just not so much at the taxpayer’s expense!
Indeed, the Govt should really wind back much of Costello’s tax free super “reforms” as they are costing an arm and a leg and really only benefit the better off ( ie those who were never going to be eligible for the age pension anyway – and yes I am one of the beneficiaries of this largess).
The way super is going a present the concessions will cost more than paying the age pension to everyone without a means test!
i don’t understand how people get upset about not being able to plough their money into super.
the hidden fees that are taken from super accounts can be alarming.
grow up baby boomers. stop looking for the soft ride from government handouts.
get it through your skulls; there is’nt going to be a soft ride, the government has’nt got the money.
if you think that the baby boomers are entitled to the majority of the nation’s budget. at the expense of everything else – then you are dreaming.
and by the way; a lot of the boomers that i grew up with got their money, and piddled it up against the wall.
no sympathy there.
regards,
war baby
It is the Australian Government’s prerogative to set the superannuation rules but the way the present government has been changing the rules part way through the game to me is just stupid and unfair. For those like me who are getting close to retirement and planned on making concessional contributions of $50,000 a year until then, it makes planning extremely difficult. The fact that there has been no decision yet on whether superannuation contributions that have been moved into an allocated pension fund will be counted in the $500,000 threshold is another major area of uncertainty. I used to be a strong Labor supporter but not any more.
Why is anyone surprised that Labor would do such a thing? Of course they have forgotten that this decision affects their union base. It is truly hypocritical to ask people to save for their own retirement then do everything possible to prevent that from happening, all under the guise of class warfare.
My opinion is that the concessional cap will be increased again for the over 50′s. It will happen with a change of govt, which is inevitable, just the timing is uncertain. The tax lost in revenue to the govt through concessional super is nothing compared to what the govt would pay out in pensions, IF, as a nation we are unable to contribute more to our own retirement.
We are being told that the “baby boomers” are going to be a burden on society in our later years – we then try to put more away for our super and now that is being taken away from us.
Your article sums it up so well, kids leave home, morgage is reduced and now we try to save for our retirement only to have the rug pulled from under us.
Re: Another Super Con Over 50′s cap removed
Trish you have hit the nail on the head with “The proposed change to the contributions cap was always about politics, not policy and you can thank former Prime Minister Kevin Rudd and Treasurer Wayne Swan, for the ‘itsy bitsy, sometime in the future when I won’t be around, or the public won’t care anymore’ nature of law making. ”
I and my wife are both 62 and trying like mad to save as much as possible for our retirement with a current combined super balance of around $350,000 using a TTR/salary sacrifice strategy together with 2 negatively geared properties which have both lost value over the last few years and a massive mortgage on our house that we hope to get rid of by selling the properties and drawing down on super after we retire to pay off the mortgage and then survive on a part government pension together with an account based pension. I will turn 65 in the February of the 2014-15 year and my wife in the December so we will have very little time to catch up before retirement. All this legislation is going to do is make life much more difficult for us to stay below the cap as part of our super goes into a defined benefit fund which requires formulae to calculate the actual contribution amount for the cap and eventually result in us needing a larger part government pension as we will not have been able to save more. So many of us baby boomers have far less super than we need to retire without drawing a part pension from the government, all this government has done is make it much more likely that we will be drawing more from the government and less from our own super. Robbing Peter to pay Wayne a budget surplus – how short sighted.
These policies are so nonsensical it beggars belief. We’re continually told to save for our retirement, but simultaneously we’re told we can’t contribute much to super. All under the guise of reducing tax breaks for ‘wealthy’ individuals. What a load of bull. It’s no wonder Australians have very little interest in understanding how super works – why would they bother if the rules keep changing every year? Simpler Super, Better Super…I think we’d all be happy if we just got “Simple, Fair and Consistent Super”.
Thanks for your great work on this site. You must feel like you’re banging your head against a brick wall and shouting to a deaf, blind and stupid gatekeeper. I know I do.
I agree with everyone that the decrease in the concessional allowance for people over 50 years of age is unfair . It is also a very stupid political decision, after all the Baby Boomers are well informed voters and have long memories. I am quite sure that the concessional amount will never be increased back to the $50k limit; it never went back to the $100k limit. This decision has come at a time when the Australian population are being encouraged/forced to remain in employment for many years longer than we had planned; and we will be required to fund our own retirements if we don’t want to live on the pittance that is given to age pensioners. We are being told that we will now need close to a million dollars in superannuation balances in order to fund a comfortable lifestyle into our retirement. How are we going to do that if we are not given any assistance through the taxation system? After all, we are tax payers too.