In an effort to regain lost revenues caused by the global downturn, the Government has decided to pull back some of the superannuation tax concessions.

In particular, there are two key changes to the treatment of super that are scheduled to take effect on 1 July 2009.

And while not yet legislated, there may be benefits for you if you act before 30 June.

The concessional contribution cap will halve

Salary sacrifice, along with making personal deductible super contributions, has long been regarded as a great way to boost your retirement savings by paying less tax.

Both of these fall under the banner of ‘concessional contributions’.

Under the new rules proposed in the Budget, the cap on concessional contributions will be scaled back.

From 1 July 2009 the caps will reduce from:

• $50,000 to $25,000 pa (for people under age 50), and
• $100,000 to $50,000 pa (for people aged 50 or over until 30 June 2012) and $25,000 thereafter.

The caps limit the concessional contributions that can be made (or received) each year.

To make the most of the higher caps that currently apply, you may want to:

• salary sacrifice any bonus you receive, or
• make personal deductible contributions before 30 June this year.

The maximum co-contribution will reduce

Government co-contributions were introduced in 2003 as a way to encourage low to middle income earners to save for their retirement.

Under the current rules, if you earn a lower income and make personal after-tax super contributions, you may be eligible to receive a Government co-contribution into your super account of up to $1,500.

To qualify for the full co-contribution, you need to contribute at least $1,000 and earn $30,342 pa or less. A reduced amount will be paid if you contribute less than $1,000 and/or earn between $30,342 and $60,342 pa.

However, from 1 July 2009, the maximum co-contribution will be cut to $1,000 (for the next three financial years) and $1,250 (for a further two years) before returning to $1,500 from 1 July 2014.

To benefit from the higher co-contribution amount this financial year, you will need to make a personal after-tax super contribution before 30 June.

What’s the benefit?

So while there is a limited window of opportunity, it’s well worth considering how acting now may benefit your personal situation.

That’s because both of these opportunities could enable you to:

• get more money into super, where earnings are generally taxed at a maximum rate of 15% (not your marginal rate of up to 46.5%), and
• receive more tax-free income at age 60 or over.

Please Note: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please contact your financial adviser prior to acting on this information to ascertain the maximum amount of contribution you can make this financial year.