Monday, 2 March 2015

Net Worth: February 2015

A significant rise in the Australian Stock market over the past month gave a major boost to my net worth via increases in the valuation of my geared stock portfolio (gearing is fun when the market is rising -- not so much during the GFC) and also a rise in my superannuation account balance. Our house price estimate also managed another slight increase. Overall my net worth hit a new high of over A$1.75 million.


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Thursday, 5 February 2015

Net Worth: January 2015

 The three major components of my net worth (my share of our house, my geared stock portfolio, and my retirement savings account) all enjoyed substantial gains during January, pushing my net worth total up by just over 3%. The strength of the Sydney real estate market shows no sign of abating, and with inflation remaining low there is even the prospect of a rates cut by the RBA providing further stimulus to the housing market as a by-product of their attempt to stimulate the economy as the impact of the resources bust continues to drag on economic growth and boost unemployment. In hind-sight it would have been better to postpone selling our investment property for another couple of years, but I'm glad to be free of the hassles of being a land-lord. The Australian stock market is likely to benefit from any economic stimulus provided by a rates cut, as despite recent gains the ASX200 is still well below the pre-GFC levels. While it would be foolish to try and predict how things will develop during 2015, from this point the prospect of achieving a net worth of two million by the end of this year or next seems possible. How likely it is remains anyone's guess. One month (October) of employer superannuation contributions were paid into our SMSF bank account during the month, with the other two monthly contributions for the quarter due any day now (they had to be paid by the end of the month after the end of the Oct-Dec quarter).

As usual I've left unchanged (at $325,000) the initial valuation for the rural property I was given last March as I intend leaving the property to my sons, so any potential capital gains will remain unrealised. I only include it at all as the holding costs (council rates, house insurance etc.) are a drain on my cash flow. While I don't include notional gains in its valuation in my monthly net worth figures (the current monthly valuation estimate is $366,450) I will add any large capital expenditures (such as building an extension to the existing house) to its valuation to 'balance the books'. The monthly valuation estimates for this property are not very reliable in any case, as the source data is movements in the average house sale prices in the nearby township, and not sales data for similar rural 'hobby farm' properties.



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Sunday, 25 January 2015

Back from our holiday cruise

After spending a few days at a seaside motel with the family over the Christmas period, I took a couple of weeks of annual leave and we all went on a 13-day cruise from Sydney to New Zealand on the Sun Princess. The total cost was around $10,000 (or about $2,500 per person), which isn't too bad considering that included the travel (to and from New Zealand and between the stops at Milford Sound, Dunedin, Wellington, Napier, Auckland, the Bay of Islands and a couple of other places), the accommodation, all meals (aside from a few snacks and a couple of lunches while in port), and land excursions to Rotarua and around Bay of Islands.



Aside from possibly going on a skiing weekend this year (or next year), and spending the Christmas holidays with my parents either at the rural property I 'inherited' (that is, if the farm house ever gets renovated into a livable condition again) or at a nearby motel (so I can do some work on the farmhouse and farm during the stay), we probably won't take another major holiday for another three or four years. We had been thinking of taking the boys on a tour of Italy/Greece sometime, but as DS1 is already in year 10 this year and starting one HSC subject as an accelerated student, we will now defer this until after he has finished his year 12 (HSC) exams. Considering the high cost of traveling around Europe by car, train or plane and staying in hotels in the major cities, I am now considering doing a cruise instead when we eventually travel there. A 14-day cruise stopping at Rome, Florence, Venice, Athens, Istanbul and several islands looks quite attractive, but not cheap. Ah well, time to start building up my holiday savings account once more...

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Friday, 2 January 2015

Net Worth: December 2014

Another good month with the stock market doing well towards the end of December, Sydney house prices continuing to rise (although it looks as if the property market is cooling rapidly, and could dip next year if Australia experiences economic weakness or a mild recession), and our SMSF balance improved due to mostly being invested in the Vanguard High Growth Index Fund, which saw gains due to both the local stock market rise and the drop in the Aussie dollar boosting the value of International stock and property investments.

Hoping for a happy new year of investment returns in 2015!



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Managed to get my SCATT training system working again

One of my hobby/sport activities is target shooting. I mostly shoot 10m air pistol as it is more fun to shoot that air rifle (in Australia shooting with an air rifle jacket on can get very hot and uncomfortable in summer!) and shooting .22 and other caliber semi-automatic pistols for rapid fire and standard pistol events is both more expensive (ammunition costs quite a lot) and less convenient (the air pistol club is close to home and doesn't require onerous 'volunteer' working bee sessions from its members). I also enjoy air pistol events the most of all the Olympic shooting events, as my temperament is more suited to the slow, high precision mode of air pistol shooting (free pistol would also be fun, but that would be a lot more expensive!).

I bought a SCATT Solution system for air pistol training way back in 2000, but I hadn't used it for many years (after we moved house and DS1 arrived I no longer had much spare time for shooting) and I wasn't sure that I would be able to get in working with one the newer Windows computer systems I have on hand nowadays.

The original software (version 2.0) had come on a 3.25" floppy disc and had been installed on a laptop (that I no longer have) running Windows 98. These days I only have one desktop computer that even has a 3.25" FDD (and the serial port required to connect to the SCATT Solution hardware), but that machine is running Windows 7 and I found that the software wouldn't install. I did manage to download the newer software version from www.scatt,com and it fortunately it recognized the old SCATT system once I had ticked the check box “enable legacy (RS-232) devices” in the “Options” menu. Everything is working fine with new 2014 software version and my old 2000 vintage SCATT Solution (a great relief, given that a new SCATT system would set me back around A$1400 and doesn't offer much improvement over the old 'solution' version), so I now should be able to use it for regular training sessions during 2015 and try to improve my scores back up to 'A' grade (my last two club shoot scores were mediocre - 529 and 533).

Searching the web hasn't turned up any useful documentation on how to actually use the SCATT output to improve your scores (although I guess it must be a useful tool, given that around 80%-90% of top international shooters apparently use the system for training), but there were some documents available online that explain what all the graphical outputs (available after a 60-shot 'match' session) actually mean. I guess I'll just commence training regularly using the SCATT and see what effect strength and fitness training (and weight loss) have on my scores and the SCATT plots. I can also try out minor adjustments to my shooting stance and technique and see if any effect is immediately apparent in the SCATT readouts. Hopefully after a few months of regular training sessions I will be able once again shoot a 550-560+ at the club monthly competition, which would put me back in the ball park for winning the 'A grade' group at air pistol competitions, and possibly place in the 'top 10' at an Open event. That would make things interesting, as these days I'm old enough to compete at the Masters Games ;)

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Saturday, 27 December 2014

Bought myself a new DSLR camera

I bought my first DSLR camera (a Pentax *ist DS) more than a decade ago, and it produced nice quality images despite the limited 6MP image resolution. One nice aspect was that I could continue to use the old K-mount lenses I'd bought in the 80's to use with my previous Pentax SLR 35mm camera, although I had to focus and adjust exposure settings manually when using those lenses.

However, that old camera had developed an electrical fault (the inbuilt flash would strobe and cause the camera to shut down when you turned it on) and despite twice trying to have it fixed by the local authorized service center, the fault kept recurring, so I decided to finally buy a new camera.

My wife and sons all have compact digital cameras that take nice 'snapshot' photographs, but I still fancy myself as a bit of an amateur photographer, so I decided to buy a more expensive digital SLR camera. In the end I opted for the Nikon D3300 camera twin lens kit. It comes with 18-55mm and 55-200mm zoom lenses, and with the inbuilt lithium battery it only weighs about half my old Pentax DSLR that required four AA batteries. It's one of the cheaper DSLR Nikon cameras, but I don't need the features of the much more expensive 'professional' cameras, or even the 'bells and whistles' that come with models such as the D5300 (who really needs WiFi connectivity between their camera and tablet, or automatic geotagging? Especially when it costs an extra hundred bucks and doesn't improve the image quality one iota?).

I took a few test snapshots during a weekend away over Christmas, and will need to watch a couple of videos on how to use it properly before we go on a two week cruise around New Zealand next month (I didn't even change the settings from the default medium-res JPEG and AUTO mode during this first outing - although I did manage to drop the new camera in the dirt once when the neck strap came updone!). One good thing these days is that SD cards are so cheap that you can buy an 8GB SD card for about the same cost as a 24 exposure roll of 35mm print or slide film used to cost, and then simply save it as the backup media after downloading the contents of a full SD card onto your PC. Even when saving each 24MP exposure in both RAW and high resolution JPEG formats an 8GB SD card will hold around 180 exposures. I've bought a handful of SD cards to use during my holidays so I won't have to worry about downloading images during the trip.

SD cards are fairly robust (according to Digital Camera Shopper "The memory cards in most cameras are virtually indestructible.. Five memory card formats survived being boiled, trampled, washed and dunked in coffee or cola" but the digital data may only last 10-15 years in storage before a significant amount of corruption or data loss becomes apparent. So for true archival storage gold CD-R are probably more secure (whether or not any of my photos will be worth preservation is a separate issue!).

Ellenborough Falls, NSW. Copyright 2014.

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Tuesday, 23 December 2014

Which Sydney Selective High School is 'best'?

While some parents apparently take the view that the 'best' selective high school is simply the one with the best HSC results (usually taken to be the % of their year 12 student cohort on the HSC DA list), this ignores the fact that the 'best' year 7 students will, generally speaking, go on to achieve the 'best' HSC results six years later. So the selective school with the highest Year 7 entry cut-off mark (James Ruse) will get the highest percentage of students making the 'distinguished achievers' list even if there was absolutely no difference in the quality of teaching etc. between the selective high schools. What is of more interest is whether or not there is a difference in how well individual selective high schools are helping each student achieve their 'personal best', based on their individual potential.

A more considered indicator of which selective high school is 'best' (in some sense) might therefore be which one 'value adds' the most during a student's secondary schooling? One way to measure this (that schools use internally, but few schools are game to make public) is how the NAPLAN results for a cohort change from Year 7 to Year 9, compared with the typical change for 'similar' schools. However, as NAPLAN testing stops in Year 9, a better indicator of a school's influence over the entire secondary school period might be to look at HSC outcomes (%DA) vs. the cut-off entry mark into Year 7 for the that cohort of students. While there is some movement of students between schools from Year 7 to Year 12, selective school students generally tend to stay at the school they gained entry to in Year 7, and the relatively small number of additional students admitted in Years 8-11 would probably be a similar standard to the general school population.

As the Year 7 entry cut-off marks for NSW selective high schools were only published from 2008 onwards, the HSC results from 2013 and 2014 can only now be used to plot the correlation between Yr 7 entry cut-off mark and the performance (in terms of %DA in the HSC) of that cohort when they reach Year 12. To date there are only two years data available (2008>2013, and 2009>2014), and it will be interesting to see if the trends apparent in this limited data set hold in future years.

The results for thirteen NSW selective high schools that are generally ranked in the 'top ten' (in terms of entry cut-off mark) are plotted in figure 1 below. It can be seen that there is a clear correlation between the cut-off mark required for entry into each school and the percentage of these students that perform well enough to make the HSC 'distinguished achievers' list when they get to year 12. While some scatter is to be expected, the points above the trend line would suggest a school has 'added value', while those schools/years falling below the trend line appear to have under-performed in the HSC relative to the potential they exhibited going into Year 7.

The scatter show in figure 1 increases as entry cut-off decreases. This is to be expected as there is greater potential for year-to-year variation in the average ability of a cohort entering a school with a lower cut-off mark. While the cut-off mark might be the same in 2008 and 2009, the cohorts in a selective school with a lower cut-off mark could vary considerable if in one particular year a few more students with high selective school entry test scores choose to attend the 'lower' ranked school due to travel considerations etc. This wouldn't change the minimum entry score required to be accepted into the school, but could boost the % of students making the DA list.





Figure 2 shows the data grouped by gender segregation - the selective boys schools, the selective girls schools, and the selective co-ed schools. From this figure it appears that there is little impact of gender segregation in years 7-12 and student's HSC performance. The couple of data points for boys and co-ed selective schools that appear significantly below trend belong to three specific schools, so are more likely to be due to the schools 'value add' than to gender segregation effects. If that is the case, one wonders if it is such as good idea to segregate students on gender lines during high school. Getting them acclimated to interacting with the opposite sex during high school may be better than leaving it until the booze and party enhanced environment of your typical university campus!


Finally, figure 3 shows the data colour coded to each school. It appears (although it is hard to draw solid conclusions from only two data points) that some of these selective high schools (Girraween, Sydney Technical High School and Normanhurst) under-perform, while others (such as Manly Campus and North Sydney Boys) may out-perform. Such trends will become clearer as HSC results for 2015-2017 are published in future years. In the case of Sydney Technical High School the relative under-performance may simply be because students choosing to attend that school are more interested in technical subjects that do not 'scale' as well as some other HSC subjects (due to the general composition of students taking that subject across all NSW high schools).


It should be noted that these results are Sydney-centric, as there is a greater pool of students within reasonable traveling distance of the Sydney selective high schools, which pushes up their cut-off marks for entry. Selective high schools in country areas tend to be in lower demand, so their cut-off marks tend to be lower. This would mean there is more year-to-year variation in the average ability of the student cohort, independent of the cut-off mark, making it harder to tell if a particular school in these areas is performing above or below trend from the available data. Hopefully BOSTES uses their access to the median entry score of students in these schools and their eventual HSC results to identify which school are achieving the best outcomes, and identifying which variables (such as teacher qualifications, experience, school resources, student socio-economic background etc.) are important, and which positive factors can be promulgated to other schools.


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Sunday, 21 December 2014

School reports hit the hip pocket

The school year has ended and the boys have been shipped off with my parents to spend a week at a beach-front resort on the mid-north coast before we join them on Christmas eve. The boys deserve a break - they've both been applying themselves at school and have achieved the results they deserve. They both got "straigh-A's" on their school report cards, so I'll be giving them $30 each as a small reward for their efforts. The rewards system I introduced last year was $5 for every 'A' (actually, the best report grades currently in use in the NSW education system are 'outstanding' in high school reports, and 'high' in primary school reports). But this year I simplified in to just being a flat $30 rewards for getting straight-A's.

DS1's school achieved another good outcome in this year's HSC results - ranking 8th in the state with 50.7% of the students making the 'distinguished achievers' list. But the whole idea of ranking high schools is a bit silly, as the results are fairly predictable and seem to be based mostly on the mix of students that are attending the school, rather than the 'value added' by the school itself.

For example, the school that is consistently ranked number one in the state, James Ruse High, is therefore the most sought-after school for selective school applicants. It therefore has the highest 'cut-off' mark of any of the selective high schools each year (ie. only the 'best' students can get in), and, as sure as night follows day, six years later that cohort of students gets the best HSC results in the state...

The correlation between the minimum entry score (or 'cut-off; mark) required to gain entry into a selective high school and its HSC results seems quite clear, so it will be interesting to see how DS1s school performs in future years. According to the trend in 'cut-off' mark over the past several years, I would predict that it will continue to do well (as the cut-off marks for entry into those years had increased by around 5 marks). Unfortunately entry cut-off marks have only been published since 2007, so the trend can't be quantified just yet, but should become clear over the next few years...

Manly Selective HS:
Yr 7 entry             >> HSC results
Year  cut-off              Year    Rank     %DA
2014   205                  2019
2013   207                  2018
2012   205                  2017
2011   201                  2016
2010   202                  2015
2009   199                  2014      8         50.7
2008   201                  2013      11       43.0
2007   n.a                   2012      7         51.4
2006   n.a                   2011      10       45.1
2005   n.a                   2010      7         47.2
2004   n.a                   2009      15       41.1
2003   n.a                   2008      15       37.7
2002   n.a                   2007      20       32.6

Comparing these to the data for one of the top selective schools (Sydney Boys High) shows that the Year 12 HSC results are dependent on the quality of the cohort selected for entry into Year 7:

Sydney Boys Selective HS:
Yr 7 entry             >> HSC results
Year  cut-off              Year    Rank     %DA
2014   218                  2019
2013   216                  2018
2012   222                  2017
2011   223                  2016
2010   219                  2015
2009   219                  2014      6         53.0
2008   219                  2013      7         48.2
2007   n.a                   2012      8         48.5
2006   n.a                   2011      4         56.7
2005   n.a                   2010      6         49.2
2004   n.a                   2009      7         43.8
2003   n.a                   2008      7         44.7
2002   n.a                   2007      10       39.2

Of course, the ranking of the school itself only has an indirect impact on an individual student's HSC result and ATAR (as the performance on the student cohort at a particular school in the HSC will affect the scaling of the HSC marks of students attending that school). Of more importance will be how well DS1 does in his chosen HSC courses, and where he ranks amongst fellow students at his school in these subjects. Getting an 'outstanding' result in all Yr 9 subjects, which puts him in the top half of the school in every subject, suggest he should be able to achieve an ATAR of 98+. But as he has no clear idea of which course he wants to do at university, it comes down to simply doing as well as he can, so that he has a good chance of gaining entry into whichever course he fancies.

DS1 is enrolled (via distance education) in an HSC preliminary subject (Software Design and Development) as an 'accelerated' student next year, so he will have completed one of his HSC subjects whilst he's still in Year 11. If he does well enough in that subject it may help him get a good ATAR result, as he will still be doing the normal workload of other HSC subjects in year 12, so he will have an extra couple of units to pick from when the best 10 units are used to calculate his ATAR. Of course the disadvantage of doing his favorite subject as an 'accelerated' student is that he will be competing with students that are a year ahead of him. Also, the distance education course is offered by a non-selective high school that doesn't have exceptional HSC results overall. So unless DS1 ranks at the very top of his class in SDD, his scaled mark in this subject won't be very high. Also, SDD in general doesn't scale up very much, due to the general caliber of the students taking this subject for the HSC, so it's unlikely his SDD result will be included in his 'best 10 units' used for ATAR calculations.

DS1 has also been offered a place in the UNSW High School Computing course in the first half of next year - which teaches the first year university course in computing to selected Yr 11/12 high school students (and a few 'exceptional' year 10 students, such as DS1). It should be fun for him to do, and quite exciting for him to be attending 'uni' after school once a week! While not an HSC subject (so I'm glad he is able to do it while in Year 10, so it won't impact on his Year 11/12 studies), it should help him do well in his SDD course. Also, if he does extremely well (getting 85%+) he would be allowed to enter the CSE Elite students program if he decides to enrol in computer science at UNSW.

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Sunday, 7 December 2014

Net Worth: November 2014

Net Worth was down slightly during November, despite another monthly gain in the valuation of our house. This was due to the Australian stock market suffering a dip during November (but this has already been largely recouped during the first week of December). My SMSF account actually increased during November despite there being no employer contributions deposited during the month and the drop in the local stock market. This was because our investment in Vanguard LifeStrategy HighGrowth Index fund gained value, probably due largely to the drop in the Aussie dollar pushing up the value of unhedged overseas investments.


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Sunday, 23 November 2014

Excess Superannuation Contributions Tax - Timing is everything

Back in May 2010 I had put in place arrangements to 'salary sacrifice' as much as possible into my superannuation, without exceeding the current concessionally taxed contributions (which is the sum of both the mandatory employer superannuation guarantee levy (SGL) plus any additional employer contributions arranged via salary sacrifice). All should have been well, as the annual total of SGL and SS I had agreed with my employer was several hundred dollars below the 'cap' on such concessionally taxed contributions, just in case there was an extra fortnightly 'pay' processed during the financial year...

However, one of the more 'interesting' inconsistencies of Australian superannuation legislation is that while employees need to have made such 'salary sacrifice' arrangements prior to the start of the financial year, and fortnightly payslips report the amount of employer superannuation contributions (SGL and SS) that have notionally been 'paid' on each pay date, the actual timing of employer contributions is much more uncertain. By law, employees are only required to pay superannuation contributions quarterly, and then they have until the end of the calendar month immediately AFTER the end of each quarter to actually make the superannuation payments.

In my case, my employer was in the habit of paying the three monthly contribution payments at the start of the month immediately following the end of each quarter. Which meant that payments for the months of April, May and June were normally processed by the payroll office at the end of June and the funds were then processed by their superannuation administrator and were deposited into our self-managed superannuation fund in the first or second week of July.

However, in 2010 the payroll officer (who was a bit unreliable, and has since been 'let go' for finally making one mistake too many) suddenly decided to process the superannuation payments a few days earlier than usual in June, so that two of the quarter's monthly payments actually got deposited into our SMSF bank account during June. This resulted in my 'concessionally taxed' superannuation contributions for the 2009-10 financial year being a total of 14 months' worth of employer contributions, and therefore exceeded the 'cap' by several thousand dollars...

As this had happened within a few days of the end of June it was way too late to take any remedial action, as any change to my salary sacrifice arrangements at that time would only have affected subsequent months, which would not be processed until the following financial year. So I phoned the ATO for advice at the time, only to be advised that nothing could be done pro-actively, and that I'd have to wait until an excess contributions advice eventuated after the 2010 SMSF tax return had been processed - at which time I could lodge an appeal outlining the 'special circumstances' which affected the timing of the employer contributions.

Nothing seemed to be happening - the 2010 SMSF tax return got processed without any excess contributions notification appearing, so I thought common sense may have prevailed (yes, that was hardly realistic when dealing with the tax office!). But then, just a few months ago, I suddenly received a notice of assessment for excess contributions tax for 2010 (quite a delay, given the 2011, 2012 and 2013 SMSF tax returns have all been processed years ago, and we are currently working with the administrator to finalise the 2014 tax return for our SMSF). The excess contriubtions tax assessment was due for payment within about 21 days, so I phoned the ATO again to check on the appeals process, I was advised that there would be penalties applied if the tax wasn't paid by the due date, and that even if I lodged an appeal immediately the amount due probably wouldn't be varied prior to the due date (as appeals have up to 28 days to be processed, counting from after receipt of all required documentation). So I went ahead and just paid the $1700 or so excess contribution tax, and downloaded the relevant appeal form....

It then took two weeks to get a letter from the company payroll office outlining the fact that they had caused the problem by making an unexpected and unannounced change to the timing of their contribution payments (and I had to provide the new payroll officer with details of the superannuation employer contributions arranged and processed for 2009/10!). I then sent this letter (plus a spreadsheet showing the fortnightly contribution amounts and dates, the totals due for each calendar month, and the expected payment timings vs. the actual dates deposits appeared in our SMSF bank account, plus copies of emails I'd sent payroll reminding them to ensure payments were processed on schedule, as I didn't want to exceed the contribution cap!) along to the ATO. The ATO officer in charge of this case then asked me to provide copied of all my 2009/10 payslips to verify the amounts I'd listed in the spreadsheet. Fortunately I still had all my old payslips sitting in an archive box in the garage...

Subsequently he has also asked for copies of the 2008. 2009. and 2010 financial statements from our SMSF, which I sent last week. It then transpired that what he actually wanted was a listing of the individual employer contributions paid into my SMSF account. I pointed out that I'd already sent him copies of the SMSF bank statements which showed all the deposits, and a spreadsheet showing how much of each deposit was attributed to my account (the employer contribution deposits are complicated by the fact the DW works for the same company as myself, an the employer SGL payments for DW and myself appear as a single deposit into our SMSF bank account, and similarly there is a single monthly payment for the total of salary sacrifice made by both DW and myself).

I'm now in the process of getting a listing of the amount of each deposit transaction attributed to each member (which is based on the information I, as SMSF trustee, provided to our SMSF administrator in order to prepare the financial statements and do the SMSF tax return!). Hopefully that will be last documentation required by the ATO to evaluate my appeal against the excess contribution tax, and they may then decide to 'reallocate' some of the excess contributions for 2010 to other tax years...

Overall, this highlights one of the hidden risks of using superannuation as a tax-effective investment vehicle. Not only do you 'lock in' your savings in superannuation until you reach retirement age (and are subject to legislative risk in the meantime), you don't save a lot of tax unless you are in the top marginal tax bracket (in my case I was only saving a modest amount of tax by 'salary sacrifice', paying 15% contributions tax rather than around 30% PAYG tax on salary). And if something goes wrong and you exceed the contributions 'cap' then the 'excess contributions' have tax levied at difference between the TOP marginal tax rate (around 50%) and the 15% superannuation contributions tax rate ... so my 'excess' contributions ended up being taxed at around 50% rather than my normal marginal tax rate of around 30%!

All in all, and especially in light of the tendency of government to chop and change the superannuation rules relating to the 'cap' on employer contributions, it seems best to stay well below the limits set for concessionally tax superannuation contributions. Especially if your employer has a badly run payroll office!

ps. There were also complications caused by the 'cap' being suddenly changed from year-to-year by the government. From $50,000 pa for over-50s, back to the standard $25,000 pa for everyone, then back up to $35,000 for those over 55 etc... no wonder many people tend to ignore superannuation as being 'too complicated' in Australia!

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