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Concessional contributions: Turning 50 is all about timing

Q: I was born in May 1966 (turning 50 in May 2016). Can you explain which financial year I am considered to be over 50 in relation to the special $35,000 concessional contributions cap?

A: For the benefit of other readers, I will first explain the concessional (before-tax) contribution rules for those aged 50 years or over.

If you’re aged 50 years or over, you can take advantage of a special concessional cap of $35,000, for the 2015/2016 year. If you’re under the age of 50, then your concessional cap is $30,000 for the 2015/2016 financial year. Note that the rule is more specific than these comments which I explain below.

So, if you don’t conveniently turn 50 on 1 July, when do the super rules consider you turn 50 for the purposes of taking advantage of the larger concessional cap of $35,000?

If you’re aged 50 years or over, you can take advantage of a special concessional cap of $35,000, for the 2015/2016 year. More specifically, if you’re aged 49 years or older on 30 June 2015, then your concessional (before-tax) cap for the 2015/2016 year is $35,000.

If an individual is aged 49 years or over on 30 June 2015, then he or she has a special annual concessional contributions cap of $35,000, for the 2015/2016 financial year. Individuals aged 48 years or younger on 30 June 2015 have an annual concessional cap of $30,000 (for the 2015/2016 year).

A person turning 50 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 50 in May 2016 can contribute $35,000 in the 2015/2016 financial year

Note: Since 1 July 2014, Australians aged 50 years and over have been 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 is $35,000 (provided the general cap is less than $35,000). For the 2013/2014 year, the $35,000 cap applied to over-60s.

Note: If you’re under the age of 50, then your concessional cap is $30,000 for the 2015/2016 financial year. More specifically, if you’re aged 48 years or under on 30 June 2015, then your concessional cap for the 2015/2016 year is $30,000.

You can find more general information on concessional contributions in the SuperGuide article Super concessional (before-tax) contributions: 2016/2017 survival guide.

Can an individual contribute more than the general cap of $30,000 before they actually turn 50?

This is another common question asked by those hoping to take advantage of the special concessional cap for over-50s. For example, if someone turns 50 in May 2016, can they contribute more than $30,000 (limit for under-50s) before their birthday, or should that contribution be made after their birthday?

Based on the super rules, provided you are 49 years or over on 30 June 2015, then it doesn’t seem to matter if you make the contribution before or after you turn 50 during the 2015/2016 year, provided that you are 49 (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 50 or over. You need to confirm your personal circumstances, and what concessional cap applies to you, with the ATO.

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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