Gov’t announcement provides super clarity

The financial services community has welcomed the announcement by Treasurer Peter Costello clarifying the status of the proposed $150,000 annual cap on post-tax superannuation contributions announced in the May Federal Budget.

Transitional arrangements covering the post-tax contributions announced by the Treasurer reflected the content of preliminary submissions filed with the Government by a number of financial services organisations.

Under the transitional arrangements, the Government has decided to allow the $150,000 cap to be averaged over three years to allow people to accommodate larger one-off payments.

Costello said post-tax contributions made between July 1, 2005, and Budget night May 9, 2005, would not count towards the cap and this meant the 2005-06 cap of $150,000 would only apply for contributions made between May 10, 2006, and June 30, 2006.

He made clear that the annual entitlement would operate on a “use it or lose it” basis and that if the cap was not fully utilised in any year then the used amount could not be credited to a future year.

The changes have been welcomed by the industry as providing certainty for financial planners by clarifying the status of contributions made in the current financial year.

Commenting on the changes, Tower Australia’s Carly O’Keefe said it had injected much-needed certainty into the Budget changes announced last month.

“This will enable financial planners to act within the current financial year and provides an excellent window of opportunity with respect to the averaging of the post-tax contributions,” she said.