Higher Concessional Contributions Cap

Originally the Government proposed that for 2012/13 and following financial years, super investors aged 50 or more would be entitled to a concessional contributions cap of $50,000 per year, if they had a super balance under $500,000.

The Government has now decided that this higher contributions cap will be deferred for 2 years.  The higher cap will now apply from 1 July 2014.

SC Comment:

Originally, under the Costello super reforms, the concessional contribution limit was $50,000 per year with a $100,000 limit applying for super investors aged 50 or more.  The higher limit was to apply for 5 years ending 30 June 2012.  The new Government reduced these limits to $25,000 and $50,000 respectively.  Now for 2012/13 and 2013/14 financial years, the concessional contributions cap will be set at $25,000.

This is a short sighted policy decision.  The decision merely reinforces the view that a $25,000 cap is adequate to produce a reasonable amount of super savings at retirement.  This is simply not the case.  Even assuming a super investor is able to contribute for 40 years at $25,000, the total contributed capital would be $850,000 as $150,000 would be lost in contribution taxes.  .