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Timing important when making contributions

WHEN it comes to making super contributions, timing can be critical, where the timing or the amount contributed is wrong, penalty tax can be paid.

WHEN it comes to making super contributions, timing can be critical, where the timing or the amount contributed is wrong, penalty tax can be paid.

QCan non-concessional contributions be made at any time in a particular financial year and then again the next financial year, or do contributions have to be 12 months apart within consecutive financial years?

A There is no requirement for non-concessional contributions to be made 12 months apart, instead the restrictions and limits are applied to each financial year. This means a person who is under 65 at July 1, 2012, could make a non-concessional contribution of $150,000 on June 30, 2012, and then make a further non-concessional contribution on July 1, 2012, of $450,000.

The $450,000 could be made any time during the 2013 financial year, even if they have turned 65 that year. The only extra requirement if they are making the contribution after they have turned 65 is they must pass the work test in the 2013 financial year.

Q If I inadvertently exceeded the limit for concessional super contributions during 2011-12 is there anything I can do? Could I ask the super fund to return the excess so it can be taxed normally, or can I ask the super fund to transfer the excess into non-concessional contributions and get my employer to record the transferred amount as ordinary taxable income?

A A fund is now unable to return excess concessional contributions. It may be possible for your employer to contact the super fund to advise a mistake has been made and some of the contributions should be classed as non-concessional contributions.

If this year's federal budget measure relating to excess concessional contributions becomes legislation you would be able to request that the excess be refunded. This can only be done once, up to an excess contribution of $10,000. You would then pay tax on this at your marginal tax rate.

Q I have just returned from a seminar where the financial adviser said salary sacrificing the maximum amount a year provides no benefit if I take out a super pension. I am over 60 and thought that there was a benefit in starting a transition-to-retirement pension from my super fund.

A If you are contributing the maximum amount to super now the benefits of a TTR pension are not as great. In this case the benefit is limited to the tax saving on the income generated from the investments allocated to the pension account. If the pension paid is less than the tax saving there will be an overall benefit.

Another benefit results when the TTR received is not needed for day-to-day living expenses. In this situation the amount saved can be recontributed to the superannuation fund as a non-concessional contribution, thus increasing the tax-free benefits in a superannuation fund.

The main benefit of a TTR pension comes when a person is not contributing the maximum amount they can to superannuation.

Questions can be emailed to

Max Newnham's book, Funding Your Retirement: A Survival Guide, is available in bookstores and as an e-book.

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