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Superannuation

Concessional Contributions

Legislation limits the amount of concessionally taxed contributions to superannuation:

Date
Concessional Super Contribution Cap
1 July 2019
$25,000
What if I go over the limits?
Once the ATO has received and assessed all your financial information, they will notify of the breach and what your options are. If you go over the concessional, or before tax cap, any concessional contribution you make above the cap, along with an interest charge, will be included in your income tax assessment. You can choose to withdraw some of your excess concessional contributions to pay the additional tax. The earnings would then be included in your income tax assessment.

Carry-forward of unused concessional contributions
From 1 July 2018, you can ‘carry-forward’ any unused amount of your concessional contributions cap. You will be able to access your unused concessional contributions cap on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire. The first year in which you can access unused concessional contributions is 2019–20. You will only be able to carry-forward your unused concessional contributions cap if your total superannuation balance at the end of 30 June of the previous financial year is less than $500,000.

Salary sacrifice to superannuation means giving up some or all of your before-tax salary in exchange for increased employer superannuation contributions. This allows you to build your retirement savings in a tax-effective environment.

Any amount over the concessional contributions cap will be included in your assessable income and taxed at your income tax marginal rate. You will also be liable for the excess concessional contributions charge. You will receive a non-refundable tax offset equal to the 15% tax paid by your fund on this amount. You can elect to have 85% of your excess concessional contributions released from superannuation, and the released amount will not count toward your non-concessional contributions cap. It’s important to regularly monitor the level of salary sacrifice and employer Super Guarantee* contributions made to your super fund if you don’t want to inadvertently exceed a cap.

Timing of your contributions can also be important. Contributions are counted towards the caps in the year in which they are received and credited by your super fund. For example, your employer may send contributions to the fund in the month after each quarter, which means that contributions for April–June will be received by the super fund in July and will therefore count towards the next financial year caps.

The Superannuation Guarantee (Administrations) Act was introduced in 1992 and states that an employer must make superannuation contributions on behalf of an employee to one of the following:
  • A complying superannuation fund
  • A Retirement savings account (RSA) or;
  • To the Small Business Superannuation Clearing House
Employer contribution must be the minimum superannuation guaranteed percentage of an employee’s ordinary earnings. The minimum SG contributions will be increasing in the coming years as per the following: Year Commencing           Minimum SG contributions
Year Commencing
Minimum SG contributions
1 July 2014
9.5%
1 July 2021
10%
1 July 2022
10.5%
1 July 2025
11%
1 July 2024
11.5%
1 July 2024
12%

A concessional contribution is a contribution made to one’s superannuation fund for which a tax deduction is claimed. Before 1 July 2017, you had to be at least substantially self-employed to be eligible to make a concessional contribution. From 1st July 2017, individuals aged under 75 can now make concessional contributions regardless of their employment arrangement. However, individuals between the ages of 65 and 75 must satisfy the work test (which states you must be gainfully employed for at least 40 hours over 30 consecutive days) to claim a deduction.

Concessional contributions are currently limited to $25,000 per annum for all ages. This amount includes any Superannuation Guarantee payments made by your employer. You must submit a “Notice of item to claim or vary a deduction for personal super contributions” to your super fund to be eligible for a tax deduction.

Division 293 tax (the additional 15%) applies to an individual for an income year if the total of their combined income for surcharge purposes and concessionally taxed super contributions exceeds $250,000.

From 1 July 2018, individuals with a total super balance of less than $500,000 just before the start of the financial year will be able to make additional concessional contributions in that financial year by accessing unused concessional contribution cap amounts carried forward from the previous five years. Unused concessional cap amounts not used after five years are lost.

It is important to stay within your contribution cap to avoid being subjected to excess contributions tax.

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