There are just a few things you need to be aware of, like the types of contributions and the limits (caps) to the amounts you can put in each year.
Making contributions to super
Contributing to super can be a great way to grow your savings for retirement and can help you save on tax. There are just a few things you need to be aware of, like the types of contributions and the limits (caps) to the amounts you can put in each year.
What are contribution caps?
The Australian government set the contribution cap amounts and these caps limit how much you can put into super in a tax-effective way.
If you put more than the cap amounts into super, it could mean you’ll pay extra tax.
Types of contributions
There are two types of super contributions:
- Concessional contributions (before-tax contributions)
- Non-concessional contributions (after-tax contributions)
Concessional contributions (before-tax)
Concessional contributions are made from your pay before it’s taxed. Because of this, when these contributions go into your super, you only pay 15% tax, which is usually less than the marginal tax rate. (If your combined income and concessional contributions are more than $250,000 a year, you may pay an additional 15% tax on some or all of your super contributions.)
These contributions can include:
- Employer super guarantee (SG) contributions
- Salary sacrifice contributions you’ve made from your pay
- Contributions you claim a tax deduction on (known as personal deductible contributions).
For more information on these types of contributions, see our member factsheets.
Concessional contribution cap
- From 1 July 2021: $27,500 per financial year
- From 1 July 2024: $30,000 per financial year
Carry-forward rule
You can also carry-forward any unused concessional contributions cap amounts, for up to five consecutive years. To do this, your total super balances must be less than $500,000. For more information on the carry-forward rule and examples of how you would use it to contribute more to your super, go to ato.gov.au
Non-concessional contributions (after-tax)
Non concessional contributions come from after tax money, this means tax has already been deducted from the money used to make the contribution. Because of this, when these go into your super, you don’t pay any extra tax.
These contributions can include:
- Voluntary contributions – money you put into your super from your take home pay
- Spouse contributions
For more information on these types of contributions, see our member factsheets.
Once contributed, you are unable to access this amount until you have met a superannuation condition of release.
Non-concessional contribution cap
- From 1 July 2021: $110,000 per financial year
- From 1 July 2024: $120,000 per financial year
You’re not allowed to make non-concessional contributions if your total super balance is $1.9 million or more (across all your super accounts), at 30 June of the last financial year.
Bring forward rule
From 1 July 2022, if you are under 75 years of age at any time in a financial year, you may be able to make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year. This is done by bringing forward your non-concessional contributions cap for a two or three year period and is known as the ‘bring-forward’ option. Be aware that specific age limits and other requirements apply. For more information on the bring forward arrangement, examples of how you could use it to contribute more to your super, go to ato.gov.au
Exclusions
Some contributions don’t count towards your non-concessional contributions cap. For example, a re-contribution of COVID-19 early release amounts and a downsizer contribution. Conditions and time limits, which are set by the ATO, apply to some of these contributions. For information on all contributions types that don’t count towards the caps go to ato.gov.au
The Work Test
If you are under age 75, you can contribute to super even if you are not working. However, if you are aged 67-74 and want to claim a tax deduction for personal non-concessional contributions, you need to meet the work test or work test exemption.
- To meet the work test: You must be gainfully employed for at least 40 hours over 30 consecutive days during the financial year.
- To meet the work test exemption: You must have been 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 claim the work test exemption if you have claimed it in a previous financial year.
What happens if I go over the caps?
Concessional contributions (before-tax):
If you go over the concessional cap, the extra contributions are included in your assessable income and will be taxed at your marginal tax rate, minus 15%. This is because you already paid 15% tax on these contributions. If you exceed your concessional cap, the ATO will write to you and confirm what action is required.
Non-concessional contributions (after-tax):
If you go over your non-concessional cap, the ATO will write to you about the two options available to you.
- Option 1: 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 non-refundable 15% tax offset, and issue you with an amended notice of assessment.
- Option 2: 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.
We can help you
Making contributions to super can be complex. If you want some help, call us on 1800 692 877. As a BUSSQ member, you can get personal financial advice on contributions at no extra cost▷.
