The tax laws limit the amount of money you can voluntarily contribute to your super account on a concessional basis. Concessional contributions within the allowable caps are normally taxed at 15%. This is considered a concessional rate, because most taxpayers’ personal marginal tax rates are greater than 15%. Contributions over the limits result in much higher tax rates, acting as a penalty.
- Superannuation contribution caps are categorised as concessional, non-concessional and CGT amounts, with some further differentiation based on the age and status of the superannuation fund member.
- Concessional contributions are essentially those contributions which are tax deductible, and include both employer and personal contributions.
Concessional contribution limits
- 2017-18 and 2018-19 the concessional cap is $25,000 for all eligible contributors.
- 2014-15, 2015-16 and 2016-17 the concessional cap is $35,000 for anyone aged 49 years or more immediately before (i.e. on 30 June) the beginning of the previous financial year. Otherwise the cap is $30,000.
- 2013-14 the concessional cap is $35,000 for anyone aged 59 years or over on 30 June 2013. Otherwise the cap is $25,000.
- 2012-13 the concessional cap for all age groups was $25,000.
There are some conditions and restrictions after the age of 65 – see notes below.
- A work test applies between the ages of 65 and 74 – which the government intends to loosen for retirees with super balances below $300,000 – see Minister’s media release and draft legislation.
- At 75 years and over, only mandated super guarantee or award contributions can be made.
Up to 30 June 2013 employee super guarantee entitlement ceased at age 70 years, but from 1 July 2013 those entitlements continue.
The concessional contributions cap is indexed in line with average weekly ordinary time earnings (AWOTE), in increments of $5,000 (rounded down).
Concessional contributions within the allowable caps are normally taxed at 15%. This is considered a concessional rate, because most taxpayers’ personal marginal tax rates are greater than 15%.
Concessions on higher income earners’ contributions are reduced through the application of an additional (“Division 293”) contributions tax (currently an additional 15%).
Over-the-limit concessional contributions are counted towards the non-concessional cap. To avoid penalty rates of tax, from 1 July 2013 excess concessional contributions can be withdrawn, and taxed at the individual’s marginal rate plus interest. Legislation was passed in March 2015 to treat excess non-concessional contributions on a similar basis (also applying from 1 July 2013).
The potentially higher tax means that in most instances members will want to keep super contributions, and their total funds, within the specified caps.
Here’s a summary of the main super changes ( 2 mins 22 secs), courtesy of RSM in Australia:
..and here’s a brief run-down of the $1.6 million pension transfer cap:
Non-Concessional and CGT Caps
Non-concessional contributions are those made from after-tax income (i.e. no tax deduction claimed) and no contributions tax is applied to the super fund contribution. They include personal contributions for which a tax deduction is not claimed, and spouse contributions. Once in the fund, normal fund tax rates apply to earnings.
Announced as a Budget proposal was the imposition of a lifetime cap of $500,000 for all non-concessional contributions made since 1 July 2007. This proposed measure has since been abandoned in favour of reducing the annual non-concessional cap from $180,000 to $100,000 from 1 July 2017, and maintaining the existing 3 year bring forward rule. See further here and the bring forward rules.
Non-concessional (after-tax) contributions cap rules from 1 July 2017
- annual non-concessional contribution cap reduced to $100,000 per year (being 4 times the new annual concessional contributions cap)
- Individuals aged between 65 and 74 years old will (still) need to meet the work test (but see later plans to relax these rules for low-balance recent retirees).
- The non-concessional contributions cap to be indexed in line with the concessional contributions cap (i.e. AWOTE)
- Transfer balance cap: Non-concessional cap will be zero unless the individual’s total superannuation balance is less than $1.6 million as 30 June of the previous financial year
- For under 65s, new bring-forward rules apply, and there are transitional rules for those who have already triggered the rules in 2015–16 or 2016–17 and have unused balances
Non-concessional caps to 30 June 2018
|Non-concessional and CGT Caps|
* Transitional measures apply in respect of the new (reduced) non-concessional cap for the 2017-18 year and subsequently. See bring-forward rules.media release and draft legislation. The purpose is to allow recent retirees with low super balances the opportunity to to top up their funds.
Until the proposed changes are implemented, super fund contributors aged 65 years or more need to satisfy the existing work test rules.
The work test requires gainful employment for at least 40 hours during a consecutive 30-day period each financial year in which the contributions are made. Unpaid work does not qualify. [Note: A 2016-17 Budget proposal to remove the work test has been abandoned.]
From 1 July 2013 contributors aged 70 or more are entitled to super guarantee payments from their employer.
Non-Concessional Contributions Caps
Each tax year, the non-concessional cap is a multiple of the indexed concessional cap.
‘Bring Forward Rule’
Under 65 year olds have a ‘bring forward’ non-concessional cap allowance limit of 3 times their cap over a 3-year period. On that basis, the total 3-year non-concessional caps up to 30 June 2017 were:
- for 2016-17 $540,000
- for 2015-16 $540,000
- for 2014-15 $540,000
- for 2013-14 $450,000*
Note: The bring forward rule quantum triggered in 2013-14 remains at $450,000 despite the higher cap values which might otherwise have applied if triggered in a later year.
Bring Forward from 1 July 2017
The non-concessional annual limit changed to $100,000 from 1 July 2017, resulting in a new bring-forward multiple of $300,000 for future years. However transitional rules spread the effect of the reduction see further regarding the new bring-forward rules here.
Excluded from the non-concessional cap are contributions sourced in eligible personal injury payments, and contributions from small business disposals which can be dealt with under the lifetime CGT cap amount.
CGT Cap Amount
The CGT Cap allows the exclusion of eligible CGT amounts (up to a cap) from the non-concessional cap. The CGT cap amount is a lifetime allowance and is indexed each year in line with AWOTE, in increments of $5,000 (rounded down).
Eligible CGT disposal amounts include:
- up to $500,000 of capital gains that have been disregarded under the small business retirement exemption
- the capital proceeds from the disposal of assets that qualify for the small business 15-year exemption
- the capital proceeds from the disposal of assets that would qualify for the small business 15-year exemption, but do not because the asset was a pre-CGT asset there was no capital gain, or the 15-year holding period was not met because of the permanent incapacity of the person (or a controlling individual of a company or trust).
For further information:
- For summary of age and work test restrictions see Media Super
- Excess Contributions
- SMSFs in the post Superannuation reform environment
This page was last modified 2018-10-03