The simpler super package made many improvements to the superannuation regime, but there is more than one sting in the tail for the uninformed. The first of these is the change to the way concessional superannuation contributions are limited to $50,000, which may perhaps lead to an unexpected end-of-year tax bill.

From 1 July 2007, a new regime for limiting concessional superannuation contributions to $50,000 per person from all sources will come into effect. This limit will be indexed to Average Weekly Ordinary Time Earnings and will increase by $5,000 increments. As a transitional measure, a person who has reached the age of 50 may contribute $100,000 per year until the 2012 financial year.

Any concessional superannuation contributions made from all sources exceeding these limits will attract an addition tax of 31.5%, payable by the taxpayer, not by the superannuation fund. Mr Sim, superannuation specialist for GiffardSim Accountants, said that this is one of the stings in the tail from the Treasurer's simpler super package that will create an administrative nightmare for taxpayers.

This change will impact on any business where the principal is also receiving a wage from another source. Examples of where this commonly occurs is with medical practitioners who own a medical practice company making maximum superannuation contributions for the medical practitioner, but also where the practitioner is receiving superannuation guarantee payments as a part of their Visiting Medical Officers (VMO) status in the public health system. This problem will also impact individuals working for different entities where large personal superannuation contributions are being made.

Mr Sim said that these businesses and individuals will need to carefully monitor superannuation contributions paid by employers on their behalf in order to avoid being excessively taxed. GiffardSim Accountants will be contacting all affected clients to fully discuss the effect of this change on them. Other individuals looking for specific advice in relation to this issue should contact GiffardSim Accountants.