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 has been to place a cap of $1.6M - which is indexed - on the amount of total funds which can be held in pension phase accounts and pay no tax.
Concessional Contributions - In Summary |
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Otherwise known as Pre-Tax or Non-Deductible Contributions |
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These include:
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Annual Caps - Up to June 30, 2017 |
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| Under Age 50 | $30,000 |
| Up to an including Age 64 | $35,000 |
| Age 65 - 74 | $35,000 subject to meeting a work test |
| Annual Caps - From July 1, 2017 | |
| Up to an including Age 64 | $25,000 |
| Age 65 - 74 | $25,000 subject to meeting a work test |
| Catch Up Payments from July 1, 2018 | |
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If you have less than $500,000 in your super account, you can make catch-up payments if you haven’t reached your $25,000 a year limit over a rolling five year period. |
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| Spouse Concessional Contributions | |
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From July 1, 2017, you will be 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 65 and 74 the receiving spouse must meet a work test. |
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| Personal Super Concessional Contributions | |
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With effect from 1 July 2017, anyone under 75 will now be able to claim a tax deduction for personal payments they make to super up to their annual $25,000 concessional cap. There will be no need to meet the "10% income test rule", but if you’re between 65 and 74 you will need to meet the work test. |
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Tax Treatment |
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Concessional contributions (CC) are typically subject to a tax of 15%. The exception is when your adjusted taxable income is greater than $300,000 up until 30 June 2017, or $250,000 from that date; when they are subject to an additional tax of 15% (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. |
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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 |
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Otherwise known as "After-Tax" or "Undeducted Contributions" |
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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. |
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Caps - Up to June 30, 2017 |
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| Annual | $180,000 |
| Bring Forward Basis (3 Years) | $540,000 |
| Caps - From 1 July, 2017 | |
| Annual | $100,000 |
| Bring Foward Basis (3 Years) | $300,000 |
| "Downsizing" Contribution - From 1 July, 2018 | |
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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. |
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| Lifetime Cap - From 1 July, 2017 | |
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If your total super balance is at or over $1.6 million on June 30 of the previous year you won’t be able to make any further non-concessional contributions to your super. |
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| Tax Treatment | |
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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. |
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Access to Superannuation Benefits
Superannuation benefits fall into three categories:
- Preserved benefits; this category now includes the vast majority of superannuation balances (all contributions post July, 1999)
- Restricted non-preserved benefits; although not preserved, these funds cannot be accessed until an employee meets a condition of release, such as terminating their employment in an employer superannuation scheme.
- Unrestricted non-preserved benefits. Do not require the fulfilment of a condition of release, and may be accessed upon the request of the employee.
You can only (generally) access your preserved superannuation funds:
- when you turn 65 (even if you haven’t retired), or
- when you reach preservation age and retire, or
- when you reach preservation age and access a Transition to Retirement (TRIP) pension, while continuing to work.
The Preservation Ages are:
Date of Birth |
Preservation Age |
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Before 1 July 1960 |
55 |
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1 July 1960 - 30 June 1961 |
56 |
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1 July 1961 - 30 June 1962 |
57 |
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1 July 1962 - 30 June 1963 |
58 |
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1 July 1963 - 30 June 1964 |
59 |
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1 July 1964 and after |
60 |
An Overview
Within a very short period, for good and less worthy reasons, we have created a retirement savings system that ranks very highly in world terms, but is exceptionally complicated in some 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..
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