Types of Superannuation Contributions and Caps
Contributions made to an Australian super fund are divided into two types: Concessional (pre-tax) or Non-Concessional (after-tax). Both are subject to specific contribution limits or caps - usually of an annual nature, but sometimes multi-annual. The Tables below summarise these two types of contribution and the current applicable caps and some significant changes which took effect from July 1, 2017 and July 1, 2018.
The most significant change was to place a cap of $1.6M, which increased to 1.7M on July 1, 2021, on the amount of total funds which can be held in pension phase account and fund an income stream which attracts no tax. This is called the Transfer Balance Cap.
Concessional Contributions - In Summary
- Superannuation Guarantee (SG) contributions
- Additional employer contributions
- Salary sacrifice contributions and
- Contributions made by the self-employed if they meet deductibility rules.
|Concessional Contributions : Annual Cap - From July 1, 2017|
|Up to and including Age 64||$25,000|
|Age 67 - 74||$25,000 subject to meeting a work test|
|Concessional Contributions : Annual Cap - From July 1, 2021|
|Up to and including Age 66||$27,500|
|Age 67 - 74||$27,500 subject to meeting a work test
only in relation to personal deductible
Catch Up Payments from July 1, 2018
If you have less than $500,000 in your super account at the prior June 30, you can make catch-up payments if you haven’tused up your concessional contribution annual limit. Unused cap amounts can be carried forward for up to five years before they expire..
Spouse Concessional Contributions
Since July 1, 2017, you have been able to make contributions to your spouse’s super if they earn up to $40,000 a year and are aged under 70, and receive a low income spouse offset of up to $540 a year. If aged between 67 and 74 the receiving spouse must currently meet a work test.
Personal Super Concessional Contributions
Since 1 July 2017, anyone under 75 has been able to claim a tax deduction for personal payments they made to super up to their annual concessional cap. If you’re between 67 and 74 you currently need to meet the work test.
Concessional contributions (CC) are typically subject to a tax of 15%. The exception is when your adjusted taxable income was greater than $300,000 up until 30 June 2017, or $250,000 from that date forward; these contributions are subject to an additional tax of 15% (an effective tax rate of 30%).
Total concessional contributions from all the sources above cannot exceed the above annual cap - if they do then the additional contributions are taxed at your actual marginal tax rate, plus an interest charge - although you can choose to withdraw the excess contributions.
What if you exceed your Concessional cap contribution? Bearing in mind the changes effective from July 1, 2018, which may provide you with some additional "headroom" if you have less than $500,000 in your super fund, any excess contributions will be taxed at your marginal tax rate, plus an interest charge called an Excess Concessional Contribution Charge. The excess contributions are eligible for a 15% tax offset, to reflect the fact that a 15% contributions tax has already deducted from the contribution upon entry to the super fund.
Non-Concessional Contributions (NCC) - In Summary
These include all contributions made from sources which have already been subject to tax, and include foreign pension transfers - except that part of the pension capital value which reflects growth since the date of residency - and Government co-contributions.
|Non-Concessional Contribution Caps - From July 1, 2017|
|Bring Forward Basis (3 Years)||$300,000 up to and including age 64|
|Non-Concessional Contribution Caps - From July 1, 2021|
|Bring Forward Basis (3 Years)||$330,000 up to and including age 74|
Downsizing Contribution - From 1 July, 2018
If you are 65 or older and you or your spouse have owned your residence in Australia for a period of 10 years or more at the date of sale, you may each be able to make a non-concessional contribution to super of $300,000, referred to as a "downsizing" contribution - subject to any contribution being made into super within 90 days of sale. Subject to empowering legislation, the eligibility age to make downsizer contributions into superannuation will reduce to 60 years of age, likely from 1 July, 2022.Transfer Balance Cap - From 1 July, 2017
If your total super balance is at or over the current Transfer Balance Cap ($1.7M as at July 1, 2021, previously $1.6M) then you aren't able to make any further non-concessional contributions to your super.
From July 1, 2017: If you had more than $1.6 million in your retirement income account on July 1, 2017 you needed to transfer the excess into a super (accumulation) account where you would pay 15% tax on earnings within the fund, or withdraw it as a lump sum. Note that the NCC caps are a function of the annual Concessional Contributions Caps - but now a multiple of 4 times the cap, rather than the previous multiple of 6.
Within a relatively short period we have created a retirement savings system that ranks very highly in world terms, but is exceptionally complicated in many respects. Just how complicated is illustrated by the schematic overview of the super system available for download below.
Before using the schematic you should read and make sure you understand the information above and note that it is intended only as background information for individuals; it is not intended as an alternative to discussions with either your financial advisor or Centrelink and nor is the schematic intended to represent a complete overview. Consistent with our approach throughout the site, the intention is to provide you with information so that you better understand your own position prior to obtaining professional advice. It is free for personal use, but may not be used within commercial enterprises without our prior written approval.
If you would like to arrange professional advice in relation to the above matters, please complete the Inquiry form below providing details and you will be contacted accordingly. You will receive a fee quotation in advance of any advice or services being provided.
|Please Note: If your circumstances are not complex and you don't require paid professional advice then any queries in relation to Superannuation should be made directly to your Super fund trustee.|