Contribution caps
01 July 2020
Making contributions to super
When making contributions to superannuation you should keep in mind the types of contributions that can be made and their applicable limits.
Contribution limits, or ‘caps’ as they are known, have been a part of super for many years. Penalties may apply if you exceed these caps. The caps relate to you as an individual, so you need to keep track of the contributions you and/or your employer make to super across all your super funds. At BUSSQ, we can see what contributions have been made to your BUSSQ account, but we cannot access the details on any other contributions you or another employer may make to another fund. Ultimately, keeping within your contribution limits is your responsibility.
To help ensure you keep under the caps, here is an overview of some of the key contributions rules:
Concessional contributions cap
Concessional contributions are those made for you by your employer or by you if you salary sacrifice some of your pay into super, or contributions you claim as a tax deduction (known as personal deductible contributions). The concessional contribution cap is currently $27,500.
You can carry forward any unused concessional contributions cap amounts for up to five consecutive years providing your total super balances are less than $500,000 (see Carry Forward Unused Concessional Contributions).
If you exceed the cap the excess concessional contributions will be taxed at your marginal tax rate, less 15% which was the tax you’d already paid when you first made contributions to the Fund. In addition, you will also be charged interest, which is determined by the ATO, for exceeding the cap.
Non concessional contributions cap
Non concessional contributions are also known as voluntary or after-tax contributions. This cap is separate to the above concessional contributions cap. The limit under this cap is currently $110,000.
If you have a total super balance of $1.9 million or more across all your super accounts at 30 June of the previous year, you will be unable to make non-concessional contributions. If you do, you will exceed your cap. If your balance is close to $1.9 million, you will only be eligible to make non-concessional contributions up to the $1.9 million limit.
If you happen to go over your non-concessional cap, the ATO will provide you in writing of the two options available to you. The first option is to have the excess contributions and 85% of the associated earnings released to you. The ATO will add the full amount of associated earnings to your assessable income, give you a 15% tax offset, and issue you with an amended notice of assessment.
The second option is to leave the excess contributions and associated earnings in your super account. The ATO will send you a notice of assessment taxing you on your entire excess non-concessional contributions at the top marginal tax rate (currently 47%). This tax must be paid from your super fund, using the release authority provided by the ATO.
If you are under age 75 there is no requirement to be working before you can contribute to super. However, if you are aged 67-74 you need to meet the work test or work test exemption to claim a tax deduction for personal non-concessional contributions.
Prior to 1 July 2022 if you were between 67 and 74, you had to meet the work test or the work test exemption before contributions could be made.
If you are aged 75 or over BUSSQ can accept compulsory mandated employer contributions into your super account. Mandated employer contributions are contributions an employer makes under a law or an industrial agreement.
To meet the work test you must be gainfully employed for at least 40 hours over 30 consecutive days during the financial year.
The work test exemption applies if you were gainfully employed for at least 40 hours over 30 consecutive days in the previous financial year and had a total superannuation balance of less than $300,000 on 30 June that year. You cannot however claim the work test exemption if you have claimed it in a previous financial year.
Making large contributions to super
Despite these limits on how much you can contribute to super without penalty, the bring forward arrangement and the carry forward rule may allow you to contribute more money into your super account. Learn more about these options.
Making contributions to super can be complex and if you’d like advice on the contribution limits call us on 1800 692 877. As a BUSSQ member you also have access to personal financial advice on contributions at no extra cost*.
Source: ato.gov.au/individuals/super/in-detail/growing-your-super/super-contributions---too-much-can-mean-extra-tax
*Personal advice is limited to BUSSQ products and is advice on insurance, investment choice, contributions and retirement. The cost of this advice is included in the BUSSQ Trustee related costs and this advice is provided by Link Advice Pty Ltd (ABN 36 105 811 836 AFSL 258145). This article provides general information only and does not take into account your personal financial situation or needs. Before acting, you should consider the appropriateness of the information to your needs or obtain financial advice tailored for your personal circumstances. Prepared by BUSS (Queensland) Pty Ltd (ABN 15 065 081 281, AFSL 237860) as Trustee for BUSSQ (BUSSQ Fund, ABN 85 571 332 201).