Changes to superannuation laws in the 2012 Federal Budget may cause some Baby Boomers to rethink their retirement plans. Increased contributions may now lead to cap breaches.

From 1 July 2012 individuals with income exceeding $300,000 will have a tax concession on their contributions reduced from 30% to 15% .

This is the governments “spin” on hiking tax rates within superannuation up to 30% on concessional contributions for those who earn over $300,000.

The matter is further complicated by the fact that the tax includes all concessional superannuation contributions, including super guarantee payments.

Concessional Contribution (deductible) Cap Reduced for those aged over 50 to $25,000.

Last year the Government created a higher contribution limits for individuals over 50 years old who’s superannuation balance is less than $500,000, that is, their Cap was $50,000.  However this has been deferred until 1 July 2014, all individuals from 1 July 2012 will have a cap of $25,000.

Many clients planning their retirement may need to assess what these changes mean to them. It also means that many individuals over 50 may need to re-assess their salary sacrifice arrangements.