Contribution limits, or caps as they are sometimes known, have been a part of super for many years. Penalties may apply if you exceed these limits. The limits relate to you as an individual so you need to keep track of deposits you and your employer have made to super across any or all of your super funds you may have. At BUSSQ we can see what contributions you have made to your BUSSQ account, but we cannot access details on any other contributions you may make. Ultimately, keeping within the limits is your responsibility.
To help ensure you keep within these limits, here is an overview:
Concessional Contributions Cap
Concessional contributions are those made for you by an employer, or by you via salary sacrifice, or as contributions you claim as a tax deduction (known as personal deductible contributions).
The concessional contribution cap depends on your age. If you are age 48 or under as at 30 June 2016 then your limit is $30,000 per financial year. If you are age 49 or older as at 30 June 2016 your limit is $35,000 per financial year. These are the limits for the 2016/17 financial year. Remember, this limit includes contributions you make via salary sacrifice or claim a tax deduction on, plus those made by your employer.
If you exceed this cap all excess concessional contributions will be taxed at your marginal tax rate minus a 15% offset. There will be an interest charge payable on the increased tax liability – the ATO will apply this and advise the amounts. Your excess contributions tax can be paid directly from your super account using the form provided by the ATO.
From 1 July 2017 the concessional contributions cap will be $25,000 for everyone, regardless of age.
Non Concessional Contributions Cap
Non concessional contributions are also known as voluntary or after-tax contributions. This limit is separate to the above concessional contributions cap. The limit under this cap is $180,000 for the 2016/17 financial year, and will be reduced to $100,000 starting in the 2017/18 financial year. If you are under the age of 65 you can bring forward the non-concessional contribution cap from the subsequent two financial years. This is known as the bring forward rule.
From 1 July 2017, you will not be able to make non-concessional contributions if you have a superannuation balance over $1.6 million across all of your accounts. If you do, you will be deemed to have exceeded your cap. If your balance is close to $1.6million, you are only eligible to make non-concessional contributions that take you up to this limit.
If you go over the non-concessional cap, you can withdraw the excess non-concessional contributions, and any earnings. The earnings would then be included in your income tax assessment with tax payable at your marginal tax rate.
If you choose not to withdraw your excess contributions, they are taxed at the top marginal tax rate, and this tax must be paid from your super fund, using the release authority provided by the ATO.
Bring Forward rule
If you have made a non-concessional contribution in the 2015-16 or 2016-17 financial years and that triggers the bring forward, but you have not fully used your bring forward before 1 July 2017, transitional arrangements will apply so that the amount of bring forward available will reflect the reduced annual contribution caps.
If the non-concessional contribution bring forward was triggered in 2015-16, the transitional cap will be $460,000 (the annual cap of $180,000 from 2015-16 and 2016-17 and the $100,000 cap in 2017-18). If the bring forward was triggered in 2016-17, the transitional cap will be $380,000 (the annual cap of $180,000 in 2016-17 and $100,000 cap in 2017-18 and 2018-19).
If you contribute more than the transitional cap in the 2015/16 or 2016/17 years (up to $540,000 or three times the cap for those years) then you will be deemed to have met the cap for the subsequent two years.
If you make the contribution that triggers your bring forward when you are under age 65, you are not required to meet the work test (see below). However, if you have turned 65, you can still enjoy the bring-forward provisions in that same financial year but you must meet the work test before making this contribution. Once you are age 65 or over at the beginning of the financial year then you are not able to take advantage of the bring forward.
The Work Test
If you are under age 65 there is no requirement to be working before you can contribute to super. However, if you are 65 or older, you must meet the work test before contributions can be made. The work test is defined as completing forty hours of work (gainful employment, as defined by the ATO) in a consecutive thirty day period. If you make a contribution to BUSSQ and you do not meet the work-test requirements we are then legally required to refund your contribution back to you. Making contributions to super can be complex and if you’d like advice on contribution limits call us on 1800 MY BUSSQ (1800 69 2877) to speak to one of our Financial Planners.
*BUSSQ offers members personal limited financial advice about their super including: choosing insurance, choosing investments and contributions, at no extra cost as it is included in the fund’s administration fees. This advice is offered over the phone. BUSSQ also offers members and non-members more complex financial advice on a fee for service basis. This advice can be done in person or over the phone. Our fee for complex advice is very competitively priced at $150 per hour which includes GST. The cost is very low and structured purely for cost recovery. It is expected that most complex advice will cost between $300 and $750, depending on the complexity and time required by the financial planners. Non BUSSQ members who receive advice will need to be billed for the advice separately.