Australia has had limits on superannuation contributions since 1 July 2007. These fall into two broad categories: concessional and non-concessional.
Concessional contributions are before-tax contributions that form part of the fund’s assessable income. Examples include super guarantee (SG) contributions, salary sacrifice contributions, personal contributions which are claimed as a tax deduction, contributions made by another person (excluding spouse or child contributions), certain amounts allocated from a fund’s reserves and super guarantee shortfall payments.
Non-concessional contributions are after-tax contributions that do not form part of the fund’s assessable income. Examples include personal contributions which are not claimed as a tax deduction, spouse contributions, child contributions, certain overseas pension transfers, small business sale proceeds that are contributed to super and excess concessional contributions.
The caps for the year to 30 June 2018 are summarised below.
|Superannuation Contribution Limits|
|50 to under 60||$25,000|
|60 to under 65||$25,000|
|65 to under 75 and meet work test*||$25,000|
|Under 65||$100,000 or $300,000 using 3-year 'bring forward' rule|
|65 to 75 and meet work test*||$100,000|
* Member must be gainfully employed for a minimum of 40 hours in a consecutive 30-day period prior to the contribution being made.
Some important changes to the concessional contribution rules
One of the key changes for 2017-18 is that the higher concessional contribution caps that previously applied to those aged 50 and over have been scrapped. From 1 July 2017, there is a general concessional contributions cap of $25,000 which is not based on age. This limit will be indexed in line with average weekly ordinary time earnings (AWOTE) in increments of $2,500 in future years.
For those aged 65 and over, it is also important to understand the work test rules. Assuming you satisfy the work test, the general rule is that you can make contributions up until 28 days after the end of the month that you turn 75. For example, if you turn 75 on 17 May 2018, you can make contributions up until 28 June 2018. The contribution must be made and received by the fund by this date.
However this restriction does not apply to super guarantee and award-mandated contributions for those aged over 75. Other employer contributions – e.g. those via salary sacrifice arrangements and contributions by self-employed workers – cannot be accepted.
|Under 65||65 - 69||70-74||75 and over|
|Mandated SG or award contributions||Accepted without restriction||Accepted without restriction||Accepted without restriction||Accepted without restriction|
|Additional employer contributions, including salary sacrifice and self-employed contributions||Accepted without restriction||Accepted if member satisfies work test||Accepted if member satisfies work test||Cannot be accepted|
|Voluntary personal (after-tax) contributions||Accepted without restriction||Accepted if member satisfies work test||Accepted if member satisfies work test||Cannot be accepted|
|Spouse contributions||Accepted without restriction||Accepted if spouse satisfies work test||Cannot be accepted||Cannot be accepted|
New non-concessional (after-tax) contribution caps
The changes in regard to non-concessional contributions (NCCs) will have important implications for many people.
- From 1 July 2017, the annual non-concessional contributions cap is $100,000 and the 3-year bring-forward cap is $300,000. The caps were $180,000 and $540,000 respectively in 2016-17.
- If your total superannuation balance (TSB) is equal to or greater than $1.6 million, you cannot make any further non-concessional contributions.
- If you triggered the bring-forward rules during the 2015-16 or 2016-17 years, and did not fully utilise the cap by 1 July 2017, then transitional rules will apply.
- For an individual who is aged 65 years or over, any non-concessional contributions over the $100,000 annual cap could be penalised with excess contributions tax of 47%.
- If the excess contributions are not withdrawn, the 47% penalty tax rate is imposed on the individual rather than the super fund although an amount equal to the tax liability must be withdrawn from the fund.
For more information on this and other superannuation matters, please contact us.