Plum tackles new concessional contributions cap head

15 January 2008

Plum Financial Services Limited (Plum) has taken an industry-leading approach to the Better Super changes, addressing the increased chance that members might inadvertently exceed the concessional contributions cap* – and be charged a high rate of tax as a result.

According to Plum's Managing Director Mike Fitzsimons, Plum realised, as part of its project to implement the Better Super changes, that there are many circumstances where members might unknowingly exceed the concessional contributions cap (the Cap).

Any contributions above the Cap attract an additional 31.5% tax, resulting in a total tax payable of 46.5%.

'For members, it is hard to be across all of the new legislative changes to super,' Mr Fitzsimons said.

'There are a number of different factors that come into play when calculating the Cap, such as insurance premiums paid on behalf of members by employers. Most members would not connect subsidised insurance to the Cap.

'The additional tax for exceeding the Cap can put quite a dent in the amount a member is contributing to their super. We think it is vital that super funds do their utmost to ensure members not only fully understand the implications of exceeding the Cap, but have the best chance of avoiding doing so, should they wish to.'

As a result, Plum has implemented a two-tiered awareness campaign, targeting all members generally and then following up with those members who are more likely to inadvertently exceed the Cap.

The first tier of the campaign has two parts. For the past six months, Plum has been educating members generally on the Cap and the implications via a number of channels, including members' newsletters, direct mailouts and online communications.

The second part consists of letters sent specifically to members who Plum has identified may be at a higher risk of inadvertently exceeding the Cap. This consists of letters advising members of the estimated amount their employer pays on their behalf in fees and insurance premiums, and letters advising Defined Benefit members of what their notional taxed contributions are and how to calculate them.

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