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Superannuation - Contributions Cap Explained

In this superannuation guide we explain superannuation cpas and how they shape your investment and taxes.

Super contributions – too much can mean extra tax

There are caps on the amount you can contribute to your super each financial year to be taxed at lower rates. If you contribute over these caps, you may have to pay extra tax.

The cap amount and how much extra tax you have to pay depends on your age and whether the contributions are:

  • Concessional (before tax)
  • Non-concessional (after tax)

Concessional contributions

Concessional contributions are made into your super fund before tax.

Concessional contributions include:

  • Employer contributions, such as
  • Compulsory employer contributions
  • Any additional pre-tax contributions your employer makes
  • Salary sacrifice payments made to your super fund
  • Other amounts paid by your employer from your pre-tax income to your super fund, such as administration fees and insurance premiums 
  • Contributions you are allowed as an income tax deduction, such as those you make if self-employed
  • Notional taxed contributions if you are a member of a defined benefit fund, which reflects the increase to your benefits for the year. It is the equivalent of an employer contribution. Contributions made into defined benefit funds are not always linked to individual members.
  • Some amounts allocated from a fund reserve.

Once the concessional contributions are in your super fund, they are taxed at the 15% rate.

There are caps on the concessional contributions you can make each financial year. If you go over the cap, you may have to pay extra tax.

When working out your super contributions for the financial year, remember: contributions don't count when the payment is sent, they only count once the payment is received by your fund.

Make sure your fund receives all your contributions by 30 June.

Note: if you split your before-tax contributions and give some to your spouse, these contributions still count towards your concessional cap.

Your age affects your concessional contributions cap, how the cap applies and what options you may have.

Table 1: Concessional contributions caps
Income yearYour age at this dateYour concessional contribution capTreatment of excess concessional contributions
DateAge
2016–1730 June 2016<49$30,000Included as taxable income, taxed at marginal tax rate plus an excess concessional contributions charge
49+$35,000
2015–1630 June 2015<49$30,000
49+$35,000
2014–1530 June 2014<49$30,000
49+$35,000
2013–1430 June 2013<59$25,000
59+$35,000
2012–13All ages$25,000Taxed at 46.5%
(15% levied in super fund, additional 31.5% payable)

Division 293 tax

You will also pay extra tax on your concessional contributions for Division 293 if your income for surcharge purposes, including certain concessional contributions, is over $300,000.

Division 293 tax levies 15% tax on taxable contributions above the $300,000 threshold.

Salary sacrifice

If you salary sacrifice into super, these amounts count towards your concessional contributions cap, in addition to your employer's contributions (such as compulsory employer contributions).

If you make super contributions under a salary sacrifice agreement, the sacrificed amount is paid into your fund by your employer and is treated as an employer contribution.

The sacrificed amount counts towards your employer's compulsory super contribution obligations.

If your salary sacrificed super contribution is over the super guarantee amount your employer is required to pay (for 2016–17 it is 9.50% of your ordinary time earnings), your employer is not required under super guarantee legislation to pay an additional amount on top.

When making planning decisions about your employer contributions, it is also important to consider when these contributions are received by your super fund.

Contributions don't count when the payment is sent, only once the payment is received by your fund. Make sure your fund receives all your contributions by 30 June.

Timing of contributions

Your employer is entitled to make super guarantee contributions for the quarter ending on 30 June by 28 July (the next financial year).

It's up to you to keep track of contributions you, your employer, or others make on your behalf to your super account.

Keeping track of the amount of contributions and when they were received by your super fund is important – it can help you avoid going over contributions caps and paying extra tax.

Example: Fund receives cheque in next financial year

Suzette salary sacrifices $100 a fortnight. Her employer puts aside the amount each pay, then pays the amount, along with their super guarantee obligations, on the last day of the quarter by posting a cheque to the super fund.

It generally takes between one and two working days for the super fund to receive the cheque. As a result, although the amounts deducted from Suzette’s salary between 1 April and 30 June are sent on 30 June, the contribution is not received by the super fund until the next financial year.

This contribution will count towards Suzette's concessional contributions cap for the following year.

Tips to avoid exceeding the concessional contributions cap

The following suggestions may help you keep your super contributions below the concessional contributions cap and prevent you having to pay additional tax.

  • Be aware what your concessional contribution cap is.
  • Keep track of the amount of contributions you, your employer or others make on your behalf.
  • Check when your employer pays the contributions and when they were received by your super fund – contributions count towards a cap in the year your super fund receives them.
  • If you have more than one job or pay money into more than one super fund, include all of them when working out your annual contributions.
  • Remember: compulsory employer contributions are included as part of your concessional contributions.
  • If you think you may go over the concessional contributions cap in the current financial year

Ø Stop or reduce any pre-tax voluntary contributions to your super – however, your employer can't change compulsory super guarantee amounts or amounts paid under a contract or industrial agreement

Ø Delay making any personal super contributions you intend to claim as a deduction in your tax return.

     Check if your employer pays costs, such as super administration

     fees and insurance premiums on your behalf to your fund – these

     count towards your concessional contributions cap.

If you are eligible to claim an income tax deduction for your personal super contributions, only the amount the ATO allow as a deduction will count towards your concessional contributions cap.

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