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 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.
Concessional caps – since 2007-08
* For 2013-14 the cap for being 59 years old or over on 30 June 2013 is $35,000
** For 2014-15 the cap for being 49 years old or over on 30 June 2014 is $35,000.
- A work test applies between the ages of 65 and 74 – which the government has now confirmed will not apply for a period of 12 months from the end of the financial year in which they last met the work test for those with super balances below $300,000. This measure starts on 1 July 2019. Minister’s media release and work test exemption regulation.
- 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.
[News – 16 May 2017] Agents can request client super information
Agents can request client super information in order to understand the superannuation balance – see here.
Warning on year end super contributions – timing is everything!
The financial year in which super contributions are allocated can be critical, especially if you are seeking to maximise your allowable contributions under the contributions caps limits.
A taxpayer lost a case in which contributions made by Bpay on 30 June 2009 were not considered to have been received by the super fund until the following tax year commencing on 1 July 2009. The decision was consistent with the relevant Tax Office ruling.
There have been a number of similar cases, all of which serve to reinforce the point: Plan to make your annual super contributions well before the end of the financial year, to stay well clear of the legal hair-splitting which applies if you make contributions at the death-knock, and the potentially negative tax and/or administrative consequences.
For further information see:
For the period 1 July 2011 to 30 June 2013 (only) first time breaches of the concessional cap by $10,000 or less individuals could on application be withdrawn and taxed at their marginal tax rate.
See more – Excess Contributions Tax.
SMSFs – ‘Contribution Reserving
With limited exceptions, SMSFs are generally required to allocate contributions to a member’s account within 28 days. This four-week time span sets up a possible circumstance under which a concessional contribution is legally made in year 1, but not counted as part of the member’s balance until financial year 2. The contribution in year 1 is unallocated, held in ‘reserve’ until year 2 when it is allocated to the member.
A possible advantage in organising contributions that way would be to maximise super deductions in year 1 without exceeding that year’s contribution cap for the receiving member.
The Tax Office accepts this as a valid strategy where strict guidelines are followed, including adequate record-keeping, and has provided a special form to advise them when this kind of contribution reserving has taken place.
The form ‘Request to adjust concessional contributions’ (NAT 74851) is lodged with the Tax Office, so that contributions identified in a super fund’s annual return are allocated to the correct financial year. Without this information the Tax Office will be unaware of the timing adjustment, which would then need to be corrected through action (e.g. objection) on incorrect assessments. The Tax Office request that the completed form be lodged before or together with the super funds’s annual return.
Note that this procedure does not apply to non-concessional contributions, nor should the form be used to apply for contributions to be disregarded or reallocated for other reasons.
- TD 2013/22 Income tax: ‘concessional contributions’ – allocation of a superannuation contribution with effect from a day in the financial year after the financial year in which the contribution was made.
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.
Budget measures 2017-18
- From 1 July 2017, the Government will improve the integrity of the superannuation system by including the use of limited recourse borrowing arrangements (LRBA) in a member’s total superannuation balance and transfer balance cap.
- Super contributions made from 1 July 2017 may be withdrawn from 1 July 2018 for a first home deposit. Concessional contributions and earnings withdrawn will be taxed at marginal rates less a 30% offset. Up to $15,000 per year can be contributed, $30,000 in total within existing caps. See further: First Home Super Saver Scheme
- From 1 July 2018, the Government will allow a person aged 65 or over to make non-concessional contributions (“downsizer contributions”) of up to $300,000 from the proceeds of one sale of a main residence. See further: Contributions From Home Downsizing
Budget measures 2016-17
From 1 July 2017 a number substantial changes to the superannuation rules relating to contributions caps come into effect:
- the 10% ‘maximum earnings’ condition for personal super contributions deductions is removed
- the concessional superannuation contributions cap is reduced to $25,000, indexed to AWOTE (applicable to all age groups)
- Transfer balance cap – starting at $1.6 million. The transfer balance cap is a limit on how much accumulated super can be transferred into the tax‑free ‘retirement phase’ to receive pension income. The limit will start at $1.6 million, and be indexed to CPI rounded down to the nearest $100,000. See New transfer balance cap for retirement phase accounts
From 1 July 2018 – carry forward of unused concessional contributions
- Unused concessional contributions cap (from the new cap limit of $25,000 per annum) can be carried forward for a maximum of 5 years.
- The carry-forward can only be used if the total superannuation balance is less than $500,000 (as at 30 June of previous financial year)
- The first financial year in which you can access unused concessional contributions is 2019–20
The Budget 2016-17 (released 3 May 2016) contained the following superannuation policy measures:
- From 1 July 2017 the concessional superannuation contributions cap to be reduced to $25,000
Unused concessional caps from 1 July 2017 onwards to be allowed as a “catch-up” contribution for up to 5 years, for individuals with a super balance of up to $500,000 for details of further proposals limiting non-concessional contributions to a lifetime value of $500,000, see below
[News: 14 Sept 2016] Treasurer modifies proposed new superannuation cap rules
Upon implementation, the Treasurer has retreated somewhat from earlier proposed changes to the superannuation cap rules, with the following:
- The previously existing annual non-concessional contributions cap of $180,000 per year will be reduced to $100,000
- For under 65 year olds the 3 years’ non-concessional ‘bring forward’ rule remains
- Individuals with a superannuation balance of more than $1.6 million (indexed and tied to the transfer balance cap) will not be able to make non-concessional contributions from 1 July 2017.
- the proposed abolition of the work test for ages 65 to 74 will not proceed
- proposed catch-up concessional superannuation contributions will be deferred by one year to 1 July 2018.
For further implementation considerations see Law Companion Guidelines provided by the Tax Office:
LCG 2017/1 – Superannuation reform: defined benefit income streams – pensions or annuities paid from non-commutable, life expectancy or market-linked products
LCG 2017/3 – Superannuation reform: Transfer Balance Cap – Superannuation death benefits
LCG 2016/8 – Superannuation reform: transfer balance cap and transition-to-retirement reforms: transitional CGT relief for superannuation funds
LCG 2016/9 – Superannuation reform: transfer balance cap
LCG 2016/10 – Superannuation reform: capped defined benefit income streams – non commutable, lifetime pensions and lifetime annuities
LCG 2016/11 – Superannuation reform: concessional contributions – defined benefit interests and constitutionally protected funds
LCG 2016/12 – Superannuation reform: total superannuation balance
Practical Compliance Guideline PCG 2017/5 – Superannuation reform: commutation requests made before 1 July 2017 to avoid exceeding the $1.6 million transfer balance cap
Progress of the passage of related legislation through parliament can be monitored on the following links:
- Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 [passed 22 Nov 2016]
- Superannuation (Objective) Bill 2016
- Superannuation (Excess Transfer Balance Tax) Imposition Bill 2016 [passed 22 Nov 2016]
Comparison of key features of the new law and the previous law
(source: Explanatory Memorandum to the Bills)
|New law||Previous law|
|Limit the amount an individual can transfer to the retirement phase of superannuation where it is subject to the earnings tax exemption|
|The fund earnings tax exemption is generally retained. However, individuals are required to limit transfers to the retirement phase to $1.6 million (indexed to CPI in $100,000 increments).|
Individuals that exceed the transfer balance cap will have their superannuation income streams commuted (in full or in part) back to the accumulation phase and will be subject to excess transfer balance tax.
|A superannuation fund is exempt from tax in relation to earnings on assets that support its superannuation income stream liabilities. Individuals receive a benefit from the exemption in the form of higher after-tax returns.|
There is no limit to the amount of superannuation an individual can move into retirement phase where it is subject to the exemption.
|Include half of the defined benefit income (other than from untaxed sources) in a recipient’s assessable income to the extent it exceeds a $100,000 defined benefit income cap|
|In taxed defined benefit arrangements, half of the capped defined benefit income stream payments are included in the recipient’s assessable income and taxed at the individual’s marginal rates to the extent they exceed a defined benefit income cap of $100,000 (indexed).||Superannuation income stream benefits (member benefits) from taxed sources are non-assessable non-exempt income to recipients aged 60 or over.|
Superannuation income stream benefits that are dependant death benefit payments from taxed sources are also non-assessable non-exempt income if the deceased was 60 or over.
|Limit the defined benefit income from untaxed sources that can attract a tax offset to the defined benefit income cap|
|In untaxed defined benefit arrangements, the tax offset is limited to the first $100,000 (indexed) of defined benefit income the individual receives.|
Defined benefit income received in excess of the defined benefit income cap does not attract the offset.
|Member benefits from untaxed sources are assessable income to recipients. Recipients aged 60 or over are entitled to a 10 per cent tax offset.|
Superannuation income stream benefits that are dependant death benefit payments from untaxed sources are also entitled to a 10 per cent tax offset if the deceased was 60 or over.
|Adjustments to the defined benefit income cap for other defined benefit income|
|Other superannuation income stream member benefits and dependant death benefits remain subject to their existing tax treatment.|
However, if the other benefits are defined benefit income, the defined benefit income cap is reduced by the amount of that income.
|Other superannuation income stream member benefits and dependant death benefits are subject to a variety of different tax treatments. Concessions for these types of income are generally limited.|
|Allow complying superannuation funds reallocating assets from retirement phase to the accumulation phase before 1 July 2017 to reset their cost base|
|Complying superannuation funds are able to reset the cost base of assets to their market value where those assets are reallocated or re-apportioned from the retirement phase to the accumulation phase prior to 1 July 2017 in order to comply with the transfer balance cap or new TRIS arrangements.|
Where these assets are already partially supporting interests in the accumulation phase, tax will be paid on this proportion of the capital gain made to 1 July 2017. This capital gain may be deferred until the asset is sold.
|Where fund assets are segregated, movements between the pension and accumulation pool have no bearing on the cost base of the asset. For funds that are not segregated, gains on assets used to support accounts in the accumulation phase are included in the assessable income of the fund on realisation under the CGT provisions and tax liability is determined using a proportionate method.|
Concessional Contributions For Over 50s Before 1 July 2012
From 1 July 2012 there is a general concessional contributions cap of $25,000. For people aged 50 or more, an increased concessional contributions cap applied until 30 June 2012, non-indexed.
|50 and over’s Concessional Cap|
Under previously announced government proposals, the concessional cap was to have been permanently retained at $50,000 for over 50s with total super balances below $500,000. However in 2012 Federal budget announcements, that measure was deferred.
- From 1 July 2013 the cap increases to $35,000 unindexed if aged 59 or more on 30 June 2013 and
- From 1 July 2014 the cap increases to $35,000 for individuals aged 49 or more on 30 June 2014.
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 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.
[Update Dec 2018] -from 1 July 2019, Australians aged 65 to 74 with a total superannuation balance below $300,000 will be able to make voluntary contributions for 12 months from the end of the financial year in which they last met the work test.
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:
- from 1 July 2017 see below
- 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 Rules 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 2018-12-10