Concessional contributions: Turning 60 is all about timing

Q: I was born in May 1954 (turning 60 in May 2014). Can you explain which financial year I am considered to be over 60 in relation to the special $35,000 concessional contributions cap?

Answer: For the benefit of other readers, I will first explain the concessional (before-tax) contribution rules for those aged 60 or over.

If you’re aged 60 years or over, you can take advantage of a special concessional cap of $35,000, for the 2013/2014 year. If you’re under the age of 60, then your concessional cap is $25,000 for the 2013/204 financial year.

So, if you don’t conveniently turn 60 on 1 July, when do the super rules consider you turn 60 for the purposes of taking advantage of the larger concessional cap of $35,000?

If an individual is aged 59 years or over on 30 June 2013, then he or she has a special annual concessional contributions cap of $35,000, from the 2013/2014 financial year. Individuals under the age of 59 on 30 June 2013 have an annual concessional cap of $25,000 (for the 2013/2014 year).If you exceed these caps then your excess super contributions may be subject to extra tax.

A person turning 60 during a financial year can then make up to $35,000 in concessional contribution before extra tax apply to any further concessional contributions. For example, a person turning 60 in May 2014 can contribute $35,000 in the 2013/2014 financial year

Note: From 1 July 2014, Australians aged 50 years and over will also be able to access a $35,000 concessional cap; more specifically, for the 2014/2015 financial year and later financial years, if you’re aged 49 years or over on 30 June of the previous financial year then your concessional cap will be $35,000 (provided the general cap is less than $35,000).

You can find more general information on concessional contributions in the SuperGuide article Super concessional contributions: 2013/2014 survival guide.

Can an individual contribute more than the general cap of $25,000 before they actually turn 60?

This is another common question asked by those hoping to take advantage of the special concessional cap for over-60s. For example, if someone turns 50 in May 2014, can they contribute more than $25,000 (limit for under-60s) before their birthday, or should that contribution be made after their birthday?

Based on the super rules, provided you are 59 years or over on 30 June 2013, then it doesn’t seem to matter if you make the contribution before or after you turn 60 provided that you are 59 (or older) on the last day of the previous financial year in which you make the concessional contribution to your fund.

Note: I am providing a general response about the rules applicable for individuals aged 60 or over. You need to confirm your personal circumstances, and what concessional cap applies to you, with the ATO.

© Copyright Trish Power 2009-2014

Copyright for this article belongs to Trish Power, and cannot be reproduced without express and specific consent.

IMPORTANT: SuperGuide does not provide financial advice. SuperGuide does not answer all questions posted in the comments section. SuperGuide may use your question or comment, or use questions from several readers, as the basis for an article topic that we publish on the SuperGuide website. We will not disclose names or personal information in these articles. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Readers need to seek independent advice about their personal circumstances.

Comments

  1. Your articles are excellent and I am slowly working my way through them.

    My brother and sister in law directed me to your web site. I am 56 and my wife 54 and both working, salary sacrificing to the $50k. We have approached a financial advisor for advice but I have heard plenty of bad experiences.

    We have finally earning much more than we need for now and are trying to get as much as possible into super. We have a few super accounts which we intend to consolidate into a self managed fund and I have a sssNSW state super pension of $37k/yr.

    I am not sure if you answer questions or not but your article states the $50k before tax contribution to super will extend beyond 20011/12 if the person has<$50,0ook in super (otherwise rduces to $25k) . Would my pension be included in this amount? as I imagine it would represent $600k or so to get such a whole of life? pension.

    Also the rules are changing quickly. What is your latest book and where can I get it?

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