This time of year is generally when we see increased marketing surrounding end of year tax strategies and women in particular will be targeted because of the known fact that we have much lower balances in our superannuation funds than men. But before you go making any contributions to super make sure you are fully aware of your aged based contribution limits.

For the current financial year these caps are as follows:-

Under 50 Contribution Cap
Concessional (tax deductable) $25,000
Non-Concessional (tax free) $150,000*

50 and over
Concessional (tax deductable) $50,000
Non-Concessional (tax free) $150,000*

*Important Note for those under 65 years of age - there is currently a bring forward rule that allows you to contribute 3 year's worth of non-concessional contributions ($450,000) in one year. However this then restricts you from making any further non-concessional contributions for the following two years without the risk of going over your non-concessional cap.

*Important Note for those 65 years of age and over - you may only contribute $150,000 per year as a non-concessional contribution. The bring forward rule does not apply to your age group.

What many people do not realise, is that it is not only your salary sacrificed contributions or personal concessional contributions that count towards the $25,000 and $50,000 caps but you also need to include any Superannuation Guarantee Contributions made by your employer as well as any insurances or product fees your employer may pay within your superannuation account on your behalf.

And for those of you who may have two or more jobs, you have to be even more vigilant because you still only have the one concessional contribution cap across all jobs. You do not get one cap for each employer and it is you who is responsible for keeping track of all of your contributions.

You must also watch very closely the timing of when your employer makes a super contribution on your behalf. It is quite common to see excess contributions arise simply because an employer contributes in one financial year superannuation that relates to a previous year.

The Federal Government recently claimed that the number of Australians hit with additional tax on their super contributions increased by more than 75% in the last financial year with more than 65,000 people found to have breached their contribution caps.

For those who do breach their concessional contribution caps, the Tax Office will apply a 31.5% tax penalty to the amount that has exceeded the cap. This is in addition to the standard 15% contribution tax.

Under the current penalty regime, when a contribution exceeds the concessional cap, not only is the penalty tax of 31.5% applied but the amount that exceeds the cap is also reclassified as a non-concessional contribution.

In some rare circumstances, those who may have made non-concessional contributions throughout the year may also find themselves now breaching this contribution cap and if that is the case you will be taxed again at 46.5% on the amount that exceeds your non-concessional cap.

That is a potential tax penalty of 93%!

To make matters worse, there have even been more remote cases reported where a super member has discovered their error and withdrawn the excess contribution back out of their super fund without realising that they were actually too young to access their funds and therefore the Tax Office has imposed a further penalty of 46.5%. Bringing their total tax penalty to a massive 139.5%!

Now these are rare situations and in most cases where superannuation contributions are used correctly they have provided huge opportunities to legally minimise tax and significantly increase savings for retirement.
However it does bring to light the need for you to be vigilant in respect to your age based superannuation contribution limits. You are the one that the Tax Office ultimately holds responsible.

Professional advice and forward planning are essential when it comes to tax planning and superannuation contributions. Do not for a moment think that the Tax Office will be lenient because you have made an innocent mistake. They WILL impose these penalties.

Theresa Chapman is a Certified Financial Planner passionate about helping women achieve financial security. For more information email This e-mail address is being protected from spambots. You need JavaScript enabled to view it or visit www.sppgroup.com