Some insurance benefit arrangements provided by employers may result in breaches of the maximum concessional contribution cap after the planned reduction of the cap takes effect, cautions Rice Warner.
Rice Warner said in its recent Insights blog that some employers choose to provide insurance benefits via a super fund for ease of administration.
It warns that, because the premiums are treated as employer superannuation contributions, they count towards an employee’s concessional contribution cap of $25,000 per annum.
“For many employees, insurance premiums will be low and the individual will not be aiming to maximise their concessional contributions,” Rice Warner said.
“However, for those who are nearing retirement age and aiming to salary sacrifice additional superannuation contributions it can be a very different situation.”
On 1 July, the maximum concessional contribution cap will be reduced to $25,000 per annum.
Currently, employers can make annual deductible contributions of up to $35,000 for employees aged 49 or more on 30 June of the previous financial year and $30,000 for younger employees.
Rice Warner said the reduction would impact older employees who have the capacity to save more and who wish to salary sacrifice more contributions into superannuation.
“Salary sacrifice contributions are treated as employer contributions and are taken from an employee’s pre-tax salary,” Rice Warner said.
“Employees who currently salary sacrifice to the extent that total concessional contributions exceed $25,000 will either need to reduce their superannuation contributions or make after-tax contributions.”
The ifa Excellence Awards are back in 2021 and nominations are now open! This prestigious accolade recognises exceptional professionals within the financial advice industry, shining a light on the outstanding achievements from the nation's best and brightest. If this sounds like you or someone you know, then nominate today for the ifa Excellence Awards 2021!
The latest ASIC estimated industry funding levy proves that the current formula is “not equitable or sustainable” according to FPA. ...
An industry body says it is in favour of a change in government as the Coalition have “unfairly targeted” financial advisers. ...
The corporate regulator's cost recovery implementation statement for the 2021 financial year indicates the costs allocated by ASIC to the advice secto...