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 deposits you and your employer have made to super across all of your super funds. 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 under these caps, 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 is $25,000. 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 plus an excess concessional contributions charge, determined by the ATO.
You are able to carry forward your unused concessional contributions cap amounts for up to five consecutive years if your total superannuation balance is less than $500,000. Call us for more information.
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 $100,000 for the 2019/20 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 $1.6 million, you will only be 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. An associated earnings amount is calculated by the ATO to approximate the amount earned from the excess non-concessional contributions while they were held in the superannuation fund, and this amount will then be included in your assessable income
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 are under 65 years old you may be able to make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year. If eligible, when you make contributions greater than the annual cap, you automatically gain access
to future year caps. This is known as the ‘bring-forward’ option.
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 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 from Skylight Financial Solutions.
*BUSSQ offers personal limited financial advice about super, including choosing insurance, choosing investments and making contributions, at no extra cost as it is included in the fund’s administration fees. BUSSQ also offers more complex financial advice on a fee for service basis through Skylight Financial Solutions.