Concessional contributions caps: 10 facts you should know

We receive many questions about the concessional contributions caps. Throughout 2016 and into 2017, SuperGuide, as always, will regularly update readers on any proposed changes to the contributions caps (and other super changes), and the implications of such changes on super strategies.

The list of 10 Q&As set out below answer many of questions that we have received on the contributions caps.

Note: Since 1 July 2012, anyone earning an adjusted taxable income of more than $300,000 must pay an additional 15% tax on concessional contributions paid into a super fund, doubling the contributions tax bill on super contributions to 30% for high-income earners. The current contributions tax is a flat rate of 15%, and this applies to all concessional contributions made on behalf of individuals earning an adjusted taxable income of less than $300,000. The additional 15% tax for high-income earners is known as Division 293 tax, and will be expanded to those with an adjusted taxable income of more than $250,000 from July 2017. For more information on this extra tax, see SuperGuide article Double contributions tax for more high-income earners.

1. What counts as a concessional contribution?

Concessional contributions are before-tax contributions that can include employer contributions (Superannuation Guarantee contributions and other employer contributions), contributions made under a salary sacrifice arrangement, and tax-deductible contributions by an individual. You, or your employer, generally receive some type of tax advantage when a concessional contribution is made to a super fund. More specifically, quoting directly from the ATO website:

Concessional contributions include:

  • employer contributions such as
    • compulsory  Superannuation Guarantee contributions
    • any additional voluntary super contributions your employer may make
    • any fund costs paid by your employer on behalf of your super fund, such as administration fees and insurance premiums
    • the equivalent of your employer contributions under a defined benefit scheme as determined by the trustee
    • salary sacrifice amounts
  • personal contributions by an eligible person (such as a self-employed person) that are allowed as an income tax deduction
  • transfers from reserves (as defined by the regulations to the legislation)
  • the taxable component of a directed termination payment (or the total of directed termination payments plus any transitional eligible termination payments) in excess of $1 million.

2. What is the concessional contributions cap for the 2016/2017 year?

The concessional contributions caps for the 2016/2017 financial year (1 July 2016 through to 30 June 2017) are:

  • $30,000 (for those aged 48 years or under on 30 June 2016), and
  • $35,000 (for those aged 49 years or over on 30 June 2016).

Note: The Coalition plans to cut the concessional cap to $25,000 from July 2017 (2017/2018 year), and this $25,000 cap will apply to all age groups. An over-50s cap will no longer apply (for more information on this proposed change, see SuperGuide article Concessional contributions caps to be slashed from July 2017). This change is not yet law, and the rules set out in the article below continue to apply to the 2016/2017 and 2015/2016 years.

3. What is the concessional contributions cap for the 2015/2016 year?

The concessional contributions caps for the 2015/2016 financial year (1 July 2015 through to 30 June 2016) are:

  • $30,000 (for those aged 48 years or under on 30 June 2015), and
  • $35,000 (for those aged 49 years or over on 30 June 2015).

For your easy reference, the table below summarises the concessional contributions caps for the 2016/2017, 2015/2016, 2014/2015, 2013/2014 and 2012/2013 years.

Concessional contributions cap for 2016/2017 year (and earlier years)

Income yearUnder 5050 years to 59 years*60 years and over*
2016/2017$30,000$35,000$35,000
2015/2016$30,000$35,000$35,000
2014/2015$30,000$35,000$35,000
2013/2014$25,000$25,000$35,000
2012/2013$25,000$25,000$25,000
*If you are 49 years or older on 30 June 2016, then your concessional cap is $35,000 for the 2016/2017 year. If you were 49 years or older on 30 June 2015, then your concessional cap is $35,000 for the 2015/2016 year. If you were 49 years or older on 30 June 2014, then your concessional cap is $35,000 for the 2014/2015 year. If you are 59 years of age or older as at 30 June 2013 then you were eligible for the higher concessional cap of $35,000 for the 2013/2014 year.

4. Is there a special concessional cap for over-50s?

Yes. For the 2016/2017 year, if you’re aged 49 years or over on 30 June 2016, then your concessional cap is $35,000 for the 2016/2017 financial year. If you’re aged 48 years or under on 30 June 2016, then your concessional cap is $30,000 for the 2016/2017 year.

Yes. For the 2015/2016 year, if you’re aged 49 years or over on 30 June 2015, then your concessional cap is $35,000 for the 2015/2016 financial year. If you’re aged 48 years or under on 30 June 2015, then your concessional cap is $30,000.

Note: The Coalition government plans to cut the concessional cap to $25,000 from July 2017, and this $25,000 cap will apply to all age groups. An over-50s cap will no longer apply from this date (for more information on this proposed change, see SuperGuide article Concessional contributions caps to be slashed from July 2017).

Background: In recent previous years, a transitional cap of $50,000 applied if you were 50 years or over on the last day of the financial year, according to section 292.20 of the Income tax (transitional provisions) Act 1997. For example, a person who turned 50 in May 2012 could contribute $50,000 in the 2011/2012 financial year. Based on the reading of the Act, it didn’t seem to matter if you made the contribution before or after you turned 50 provided that you were 50 (or older) on the last day of the financial year in which you make the concessional contribution to your fund. Note that this higher concessional cap opportunity for over-50s, and the timing rule, is no longer available.

5. If I turn 50 during the year, can I access the higher concessional cap?

The answer is yes for the 2016/2017 and 2015/2016 years, and was yes for the 2014/2015 year but the answer was no for the 2013/2014 year.

The general concessional cap (for under-50s) is $30,000 for the 2016/2017, 2015/2016 year and 2014/2015 years, was also $30,000 for the 2014/2015 year, and was $25,000 for the 2013/2014 year.

A special higher concessional cap exists for older Australians:

  • 2016/2017 year: If an individual turns 50 during the 2016/2017 year (that is, he or she was aged 49 years on 30 June 2016), then he or she can access the special concessional cap of $35,000 for the 2016/2017 year. If he or she was already 50 at the start of the 2016/2017 financial year, then the $35,000 cap also applies for that financial year.
  • 2015/2016 year: If an individual turns 50 during the 2015/2016 year (that is, he or she was aged 49 years on 30 June 2015), then he or she can access the special concessional cap of $35,000 for the 2015/2016 year. If he or she was already 50 at the start of the 2015/2016 financial year, then the $35,000 cap also applies for that financial year.
  • 2014/2015 year: If an individual turned 50 during the 2014/2015 year (that is, he or she was aged 49 years on 30 June 2014), then he or she could access the special concessional cap of $35,000 for the 2014/2015 year. If he or she was already 50 at the start of the 2014/2015 financial year, then the $35,000 cap also applied for that financial year.
  • 2013/2014 year: If an individual turned 60 during the 2013/2014 year (that is, he or she was aged 59 years on 30 June 2013), then he or she could access the special concessional cap of $35,000 for the 2013/2014 year. If he or she was already 60 at the start of the 2013/2014 financial year, then the $35,000 cap also applied for that financial year.

6. I am self-employed. What is my concessional contributions cap?

Self-employed Australians are subject to the same contributions caps as employed Australians.

Note that you must also satisfy other requirements when making tax-deductible super contributions. For example, a self-employed person planning to claim a tax deduction for a super contribution must notify their super fund in writing before they lodge their tax return for the financial year, or by the end of the financial year following the year the contribution was made, whichever is earlier. For more information on tax-deductible contributions see SuperGuide article Who can make tax-deductible super contributions?

7. I want to make concessional contributions for the 2016/2017 year, and the 2017/2018 year, and split the contributions with my wife so they are directed to her super account. Can I?

An individual can split concessional (before-tax) contributions with a spouse provided that the super fund the individual belongs to permits contribution splitting. Only 85% of the contribution reaches the spouse account because the super fund deducts the 15% contributions tax before splitting.

If an individual plans to split super contributions with a spouse, then the receiving spouse must be under the age of 65 (although the Coalition government has promised to raise this age to 74 from July 2017, subject to legislation). The individual making the contribution must complete a special form stating they intend to split super contributions. If you plan to claim a tax deduction for super contributions, then that notice to claim a deduction must be lodged before the super splitting declaration.

Note: You can only split contributions made in the previous year. For example, contributions made during the 2015/2016 year can only be split during the 2016/2017 year. Contributions made during the 2016/2017 year can only be split during the 2017/2018 financial year. Contributions made during the 2017/2018 year can only be split during the 2018/2019 year.

The full amount of the original contributions counts towards your concessional contributions cap, not your spouse’s cap.

Important: Since 1 July 2012, anyone earning an adjusted taxable income of more than $300,000 must pay 30% tax on concessional contributions paid into a super fund (rather than 15%), and this extra tax is likely to apply to those Australians with an adjusted taxable income of more than $250,000 from July 2017.

For more information on contributions splitting see SuperGuide article Super for beginners, part 7: Can I split my super benefits with my spouse?

8. I am over 65 and want to take advantage of the concessional cap. I consider myself retired but I do work intermittently. Can I make a concessional contribution?

Anyone aged 65 or over must satisfy a work test before contributing for the 2016/2017 financial year. If you’re aged 65 or over (but under the age of 75), you can make super contributions (concessional or non-concessional) if you’re at least gainfully employed on a part-time basis. What this means is that you must work for at least 40 hours in a period of not more than 30 consecutive days in the financial year in which you plan to make a super contribution.

The work test can be satisfied when “employment” involves any endeavour where you receive remuneration for your efforts, including farming, babysitting, cleaning, lawnmowing, gardening, consulting and paid employment. You will need to confirm with the tax office whether your arrangements satisfy the work test rules.

Note: Volunteer work does not count towards the 40-hour work test.

Important: Although the work test continues to apply for the 2015/2016 and 2016/2017 financial years, the Coalition government plan to remove the requirement for a work test for over-65s, when making super contributions, taking effect from 1 July 2017 (subject to legislation).

9. What happens if I exceed my concessional contributions cap for the 2016/2017 year (or the 2015/2016 or 2014/2015 years)?

For the financial years from July 2013, the federal government now allows individuals to withdraw any excess concessional contributions made from 1 July 2013 from their super fund. These excess concessional contributions will be taxed at the individual’s actual marginal tax rate, plus an interest charge (as would happen for income tax paid late to the ATO). Note the tax rate is the individual’s marginal tax rate, not the top marginal tax rate. If you’re already on the top marginal tax rate, then you will be only hit with a new interest charge.

Important: Being aware of the contributions caps is very important. For previous financial years, including for the 2012/2013 year, if you exceeded your concessional contributions cap, your excess contributions above the cap can be subject to an additional 31.5% tax, in addition to the usual 15% contributions tax.

Note: Effective for 2 financial years, from 1 July 2011 until 30 June 2013, individuals who have breached the concessional contributions cap by up to $10,000 can request that these excess contributions be refunded to them. You can only make this request if you have breached the concessional caps for the first time. From 1 July 2013, you are permitted to withdraw all excess super contributions made on or after 1 July 2013.

10. Will the concessional cap for over-50s be indexed?

The temporary higher cap of $35,000 for over-50s (and for over-60s during the 2013/2014 year) was introduced as a compromise when the former ALP government cancelled its policy to introduce a $50,000 cap for over-50s.

At the time, the ALP government stated the special cap would not be indexed which means that it would eventually merge into the general concessional cap (which is indexed). Until recently, we estimated this would happen from 1 July 2018.

Important: On 3 May 2016, the Coalition announced that the concessional cap would be cut to $25,000 from July 2017, and that the $25,000 cap would apply to all ages. Now that the Liberals have won government in the 2016 Federal Election, the cut in the concessional cap from July 2017 is highly likely. The ALP has not yet indicated it will support this change, but based on previous policy positions in relation to contributions caps, it is highly likely the ALP will support cutting the concessional cap to $25,000.

For more information on super contributions…

Check out the following SuperGuide articles:

 

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Comments

  1. I am 53 years of age and turn 55 in March 2015.
    Can I take part of my super when I turn 55 even though I intend working until 65 years of age.

    Thanks
    ken

  2. Hi,

    You indicate that the concessional contribution cap for under-50s for the 2014-15 year will be $30,000.

    Presumably this means that the underlying indexed figure (before being rounded down to the lower $5,000), is a bit below $30,000 in 2013-14 (and so the effective cap is now rounded to $25,000), but that with indexation it is anticipated that it will be above $30,000 in 2014-15 (and so then will be rounded down to $30,000).

    I am having trouble finding the current actual indexed figure before rounding. Are you able to confirm what this figure is? Is there any government source that can be referenced?

    Many thanks,

    Paul

  3. For FY 13/14 my concessional contribution cap is $35,000. If I retire in December 2013, will it still be $35,000 or a pro-rata amount?

  4. patrick chan says:

    I am age 59, turning 60 in April, 2014. Under new concessional Tax rules, Would I able to contribute up to 35K from July 1,2013? Did the draft legislation becomes Law relating to this matter ? Thank You

  5. Hi Trish

    I am over 50, still working and was careless and have salary sacrificed more than $25,000 into super this year 2012/13. Can I ask my super fund to return the excess over $25,000 to me?
    Thanks
    Junie

  6. Mike ELLIOTT says:

    If a person reaches age 65 in the middle of the tax year and wishes to make contributions to their supperannuation, do they have to make the payment before their 65th birthday or can it be at any time during the tax year. Thank you.

  7. do the bring forward rules still apply for peoplle close to retiring like me i am 64 and about to sell a rental and split between the wife and I to super as we thought we could still do how do we go

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