What Are Notional Employer Contributions To Superannuation All About?

The new superannuation changes take effect from 1 July 2017 and for members of some Defined Benefit Superannuation schemes these changes are significant.

If you are a member of a Defined Benefit Superannuation Scheme and do not know what the implications of a Notional Employer Contribution are, you need to get some urgent advice as it is important for a number of reasons.

For members of the Commonwealth Superannuation Scheme (CSS) and the Public Sector Superannuation (PSS) Scheme, things are about to change significantly, and for the worse. Until 30 June 2017 the unfunded portion of employer contributions to the CSS and PSS for contributing members are ignored for the purpose of determining their Concessional Contribution Cap, but that is about to change from 1 July 2017.

From 1 July 2017 a notional employer contribution for CSS and PSS members will be reported to the Australian Taxation Office and with the associated reduction in the annual Concessional Contribution Cap to $25,000, salary sacrifice contributions may need to be scaled back significantly. For PSS members, the Notional Employer Contribution is also affected by the member’s personal contributions which also have a significant effect on final retirement benefits.

For members of the CSS and PSS, the calculation to determine the maximum amount that can be salary sacrificed to superannuation is about to become more complicated. CSS and PSS members who are currently maximising their salary sacrifice entitlements will also need to account for the fact that their last payday for this financial year falls on 29 June 17.  There is therefore a real risk that the last salary sacrifice payment from this financial year may be received by their superannuation after 30 June and count towards next year’s concessional contribution cap of $25,000.

With all of this complexity, isn’t it great to know that our business has experts available to help you make sense of all this and can provide assistance where required. If you feel you might benefit from a Financial Advice Health Check in preparation for the latest round of superannuation changes that commence on 1 July 2017, contact us without delay.

A Financial Advice Health Check for members of the PSS is particularly important as it has been our experience that many members are not maximising their entitlements. In this situation, a Financial Advice Health Check has the potential to add tens of thousands of dollars to a member’s final retirement entitlements.

In a complex world, there has never been a better time to contact us to see how your financial situation could be improved.