Proceed on Budget proposals to avoid potential tax
To avoid any potential tax liability it would be prudent to stay within the Budget's proposed non-concessional contribution cap, Colonial First State (CFS) believes.
CFS executive manager for technical services, Craig Day, said the lifetime non-concessional cap was problematic in the lead-up to the end of the financial year.
He said superannuation fund members needed to decide if they wanted to only contribute up to the maximum of the proposed non-concessional contribution cap or what their cap is under the existing rules.
"This could significantly impact a person's ability to get money into super, especially if they've contributed previously," Day said.
"The other option is to say well, ‘no that is just a proposal and subject to the election outcome, and then passage through Parliament. I'm just going to contribute under the current law and see what happens, and if I'm required to take the money out in the future or pay tax then I'll cross that bridge when I have to'."
Day said it was impossible to say which option was better as it would depend on individual circumstances.
He warned if there was excess contributions it would need to be removed from super and would be deemed an earning rate, and could result in paying double tax in the future.
"If you want to avoid any potential tax liability it would be prudent to stay within the proposed cap," he said.
Day said a lot of people did not have records of their previous contribution levels and would have to contact the Australian Taxation Office (ATO) for the records.
"They should contact the ATO sooner rather than later as they manually calculate those amounts and it's likely to take some time," he said.
"They may be able to do it over the phone, or it might have to be in a form of a written request and that could take a few weeks."
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