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Demystifying super contribution caps Posted on October 9, 2018
If you are looking to boost your superannuation balance then the good news is that you are eligible to contribute, there is generally no limit on the amount of contributions that can be made at any one time. But there are limits on contributions that can be made whilst still receiving concessional tax treatment.
These limits are known as ‘contribution caps’. Once these caps have been reached in a financial year, any extra funds could incur excess contributions tax.
What does this mean to the individual, exactly? First of all, it is important to understand the caps apply to the individual, not to the employer. So if an individual has multiple employers then the combined contributions from those employers add up to count against the individual’s cap.
Contributions that count towards the cap include:
Employer contributions (including salary sacrifice)
Personal contributions for which a deductions notice is submitted or acknowledged
Contributions on behalf of another person (not including spouse or child contributions)
Certain amounts allocated from a fund’s reserves to a member’s account
Certain payments by the Commissioner of Taxation
The 2013/2014 financial year concessional cap for those at or under the age of 59 is $25,000 and for those 60 or over is $35,000.
In the 2014/2015 financial year, for those 50 and over the concessional contributions cap will rise to (or, for those 60 or over, will remain at) $35,000. The caps could also rise (to $30,000) for those under 50 due to indexation, although no official announcement has yet been made.
Non-concessional contributions, such as those made from take-home pay or from savings and for which you are not allowed a deduction in your income tax return, are capped at $150,000 annually before you must pay extra tax. Amounts contributed over the non-concessional cap are taxed at 46.5%, or 47% from next financial year.
If you are under 65 years old for at least one day of the 2013/2014 financial year, it’s also possible to utilise the ‘bring-forward’ rule. This means you can bundle the next two years’ worth of non-concessional contributions into this tax year, increasing your non-concessional cap to $450,000.
The bring-forward rule can only be used for future years – it is not retrospective and past years do not add to your limit. The three-year period begins the first year you contribute more than that year’s non-concessional cap.
As with most money matters, there are many details and much fine print that should be considered before deciding on the best course of action for one’s financial future. Even within these simple caps regulations there are exceptions and exclusions.