If you are making additional contributions on top of the super your employer is required to pay it’s important to realise that there are limits to how much you can contribute whilst still enjoying tax benefits. There are two different thresholds for concessional & non-concessional super contributions.
Non-concessional contributions cap
Non-concessional contributions include personal contributions for which you do not claim an income tax deduction. The current limit for making a non concessional contribution is $50,000 per year.
People under 65 years old may be able to make non-concessional contributions of up to three times their non-concessional contributions cap over a three-year period. This is known as the ‘bring-forward’ option.
The bring-forward cap is three times the non-concessional contributions cap of the first year. If you brought forward your contributions in 2012-13, it would be 3 x $150,000 = $450,000.
Concessional contributions cap
Concessional contributions include:
- employer contributions (including contributions made under a salary sacrifice arrangement)
- personal contributions claimed as a tax deduction by a self-employed person.
The current concessional cap is $25,000 per year, however this figure is subject to change every year. The new amount is generally announced each February.
The government has proposed concessional contributions cap to $50,000 for individuals who have total super balances below $500,000 and are 50 years old or over. If passed by parliament, these changes are scheduled for 1 July 2014.
Your contributions caps
|Tax on amounts over the cap||31.5% (plus 15% paid on your behalf by your super fund)||46.5%|
*There is 15% tax payable on concessional (before-tax) contributions paid into a super fund. Your super fund usually reduces your super account by your share of this tax.
From 1 July 2012, if you have gone over your concessional (before-tax) contributions cap by $10,000 or less, you may receive a once-only offer to have the excess concessional (before-tax) contributions refunded to you and assessed at your marginal tax rate, rather than pay excess contributions tax.
Any contributions over the concessional (before-tax) contributions cap will count towards your non-concessional contributions cap. If you have more than one super fund, contributions made to each fund will count toward your cap.
Simon is a Financial Adviser at Insight Wealth Planning. He has an advanced diploma and masters in Financial Planning and has a strong technical background.
The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.