Q: For a taxpayer aged over 50, can a total contribution of $175,000 this year ($150K non concessional and $25k concessional) and a total contribution of $475,000 next financial year ($450k non concessional and $25K concessional) be made without attracting penalty tax?
A: The short answer your question is ‘yes’ but I will need to add a bundle of qualifications to my response.
- I assume you’re referring to the 2013/2014 and 2014/2015 financial years. An individual aged 50 or over can make up to $25,000 in concessional contributions (including compulsory employer super contributions — Superannuation Guarantee) for the 2013/2014 financial year, for concessional tax treatment. For the 2014/2015 financial year however, over-50s have access to a special concessional cap of $35,000. Note that concessional contributions are before-tax super contributions, and for those under the age of 50, the concessional cap is expected to increase to $30,000 (for 2014/2015 year).
- For the 2013/2014 year, any concessional contributions in excess of the $25,000 cap may be subject to penalty tax, and the excess concessional contributions also count towards your non-concessional contributions cap.
- If an individual is under the age of 65, then he or she can use the bring-forward rules to load up non-concessional contributions (after-tax contributions). For example, an individual can make $150,000 in non-concessional contributions for the 2013/2014 year, and then $450,000 in non-concessional contributions in the 2014/2015 triggering the bring-forward rules for the following two years (2015/2016 and 2016/2017 years). Note that the federal government expects the non-concessional cap to increase to $180,000 for the 2014/2015 year, which means, if that increase occurs, the maximum bring forward jumps to $540,000.
- If an individual is aged 65 or over, the maximum non-concessional contributions allowed are $150,000 each year (for the 2013/2014 year), and $180,000 (expected to be this amount for 2014/2015 year). An individual of this age must also satisfy a work test before contributing.
You can read more information about the contributions caps in the following SuperGuide articles:
- Super concessional contributions: 2013/2014 survival guide
- Your 2013/2014 guide to non-concessional (after-tax) contributions
- Superannuation contributions: Are the super caps merely a super con?
- Superannuation contributions: Wearing two caps