Super fund members making contributions for the 2016/17 financial year have been warned not to leave the transfer too late.
Colonial First State (CFS) says 22% of customers missed last year’s 30 June deadline when making non-concessional contributions via electronic funds transfer or BPAY.
CFS says people should make contributions well ahead of the deadline and predicts that some people will miss the deadline and need to withdraw the contributions or risk “hefty” amounts of tax.
“Despite requesting funds be transferred before 1 July, the standard 24 hour settlement period meant payments were delayed,” said CFS.
“If the same were to happen this year, these contributions would be assessed against the new reduced non-concessional cap of $300,000 for people under 65.”
This warning comes after CFS noticed another spike in voluntary contributions in May – up 89% since April and up 166% compared to May 2016. Both the concessional and non-concessional contribution caps will decrease on 1 July 2017.
Colonial First State Executive Manager Craig Day said there was still a risk that people could miss the 2016/17 contributions deadline, despite the high contribution rates over the last six months.
“An electronic contribution is only made when money hits the fund’s bank account. Therefore a transfer which is made on 30 June that is subject to a 24 hour settlement may not arrive in time,” said Mr Day.
“While 30 June is the formal deadline before the super cap is reduced, people using electronic transfers to make contributions need to do so well before this date to ensure their super is assessed under the old cap of $540,000 for those under the age of 65,” he said, referring to the three year bring forward for non-concessional contributions.
“If they miss the cut off, people making NCCs of more than $300,000 may be issued with an excess contributions notice by the ATO and may need to take the excess back out of super, or risk having to pay the excess non-concessional contributions tax.”