(03) 9020 2905PORTFOLIO POINT: Your super contributions have slumped further! What you’re putting in now is down a full one-third on two years ago. Tell me why.
What’s the story with your super contributions? Where’s your love for super?
A bit over a year go, I reported that contributions to SMSFs had fallen down a very deep hole. Statistics from Multiport, a major SMSF services provider, had shown that the quantum of contributions being made to super had taken a huge hit.
From FY2009 to FY2010, contributions slumped 22%, Multiport’s figures showed (August 4, 2010).
The figures took me by surprise. But not you so much. I was expecting them to be down, but not by that percentage. I asked you why and you told me via hundreds of emails.
Primarily, it was because of the halving of concessional contribution limits implemented by the Rudd Government. But it was also for a number of other reasons, including a loss of confidence in super. If super’s rules are going to change and get worse, why not move your finances down the paths of things less likely to change, or with fewer restrictions?
Plus weakened economic conditions, business cashflow rebuilding and decisions to retire debt were all prevalent amongst your answers.
It took two weeks to cover your responses, here (11/8/10) and here (18/8/10).
Well, it would appear that a failure from government to make any substantial rectification to super has only seen things get worse. Multiport, which handles the administration for more than 1200 super funds, has reported a further fall in contributions for the year to June 30.
Contributions dropped a further 14.2% in FY2011. Added to the previous year’s falls, contributions to super in FY2011 were down 33% on FY2009.
So, why are your contributions down again this year? Please drop me an email to bruce@castellanfinancial.com.au to let me know why you’ve put in even less in the year just gone than you did the previous year, which was less than the year before. (But I also want to hear from those who bucked the trend and put in more.)
There were no major changes to contribution rules during the year. They are still sitting at the same (pitiful, when it comes to concessional contribution limits) levels of the previous year.
We are due to have the 50-50-500 rule implemented in the middle of next year – but final details have yet to be released by the government. So, those with balances under $500k should be able to continue to contribute more from July 1.
It should be the year when super members, particularly those over 50, are making the most of the final year of $50k concessional contribution limits.
Average weekly ordinary time earnings (AWOTE) rose by about 4.5% during the period, so incomes (and therefore superannuation guarantee contributions) were on the rise.
Multiport’s figures are only measuring contributions. They don’t take into account what’s leaving the super fund in the way of pensions or lump sum payments.
As we’ve reported in recent months, it looks like Superannuation Minister Bill Shorten is about to make some positive announcements on super contributions.
But we’ve become accustomed to waiting on that front. There would appear to be no hurry. It might be that it’s going to be tied in to the announcement that covers the mineral resources rent tax and the increases in the superannuation guarantee.
*****
Annually, Multiport’s figures showed a decline. But they also showed that the contributions for the June 2011 and September 2011 quarters were higher than the previous year.
Contributions for June were up to $16,779, versus $14,700 for the previous year. And for the September quarters, it was higher at $10,589 versus $8335 the previous year.
Non-concessional contributions are also making up a higher percentage of contributions at about 55% for the June 2011 quarter (50% in June 2010) and 69% for September 2011 (63% in September 2010).
Total contributions seem to have hit a nadir on the March 2011 quarter, when an average of just $5539 was contributed to each SMSF.
Have you taken a different stance on non-concessional contributions (NCCs) versus concessional contributions (CCs)? There are reasons to do so, given that CCs are taxed at 15% on the way in. Paying contributions tax, if your marginal tax rate would be lower, doesn’t make sense.
I’d like to hear from you if you know why you made lower (or higher) contributions during the 2011 financial year. My email address: bruce@castellanfinancial.com.au
Bruce Brammall is director of Castellan Financial Consulting and the author of Debt Man Walking.