Readers explain why they reduced their superannuation contributions
For myself, and many of my SMSF clients, the reduction in contribution limits has been the overriding reason for reduced contributions. Many of my business clients are now in their 50's and are looking to try to boost their superannuation contributions in preparation for retirement.
They don't wish to sell their businesses as yet and contribute the proceeds into super and they also fear that the constant changes to tax rules will render that particular opportunity gone by the time they have had enough of work (CGT small business retirement exemptions etc). The government’s constant hunt for funds is driving this fear.
In fact, many of the micro businesses are not readily saleable to a third party at all – relying on personal skill sets for they efficacy. Personal services income rules have had an impact here as well.
So, it’s the ability to siphon the cash flow from these businesses into super that really is these people’s only hope of achieving a comfortable retirement in a relatively short space of time. We are not talking big income businesses either, most of them would be earning only $50,000 to $100,000 before taxes yet they are still prepared to forego current consumption for a comfortable retirement.
The cut in contribution levels has left many of them up the proverbial creek in a barbed wire canoe. In a nutshell, this government has absolutely no understanding of how small business works, its aims and aspirations.
I have two reasons for reduced contributions: 1) reduction in allowable deductible contributions, 2) introduction of 30% ingoing tax on contributions for those earning more than $300,000.
We are self-employed and have been contributing to our own super fund since 1997, both aged 50. We are not contributing this year due to the uncertainties surrounding the Labor government’s grab for more tax revenue and super funds appear to be on their target especially SMSF. The legislative risk and the lack of confidence/trust in the asset markets are our main concerns.
The cutting of contributions limits from $50,000 to $25,000 has effectively stuffed my short term retirement plans. At age 57 my plan was to sacrifice to the $50,000 limit in conjunction with SGC. As my current balance is about $300,000 I will most likely have to work on 5 or 6 more years. Ah well.
As I am 64, the dropping of the contribution limit to $25,000 directly affected me and I reduced my salary sacrifice accordingly. I look forward to contributing $24,000 each year until the limit goes back up to $50,000.
This will directly impact on my wife and my retirement plans, i.e. when and how much. I am now resigned to working until 69 or more.
We have reduced contributions due to forced concession limit lowering.
This year we have a super tax bill of $8,000, accounting fees (including audit) of $3,000, insurance bill of $4,000 – a total $13,000 before we start. How do those idiots in Canberra expect us to save for our retirement?
Yes I’ve dropped my super contributions due to the $25,000 limitation. Just at the point where the mortgage is under control and the kids’ education nearly finished, I was finally in a position to accelerate my super in preparation for retirement – now I can’t!
Aged 67, I'd be pinning my ears back if I could. I'm putting in what's tax effective anyway.
On the matter of reduced super contributions, by far the biggest reason for my reductions was due to a large amount of accumulated losses in my Family Trust – which is where my wife and I generate our income. Since now we can offset new capital gains against those losses it negates the need to make super contributions to reduce our taxable incomes. These losses were mainly generated in the GFC however we were fortunate enough to sell a business a couple of years before the GFC so the business gains were probably also inflated at the time. We’ve pretty much stayed in growth assets the whole time (property and shares) as we have time on our side (I just turned 50).