Q: Are the caps relating to ‘concessional’ and ‘non-concessional’ contributions regarded as separate? Put simply, can I contribute $25,000 concessional and $450,000 non-concessional sums (a total contribution of $475,000) to my super fund for the 2013/2014 year? Likewise, can I contribute $30,000 concessional plus $540,000 in non-concessional contributions for the 2014/2015 year?
A: ‘Yes’ is the answer to the first part of the question. The contributions caps are separate because the non-concessional cap relates to after-tax contributions, and the concessional cap relates to before-tax contributions. Concessional contributions include any employer’s Superannuation Guarantee contributions and salary-sacrificed contributions. Tax-deductible super contributions are also treated as concessional contributions.
How do the concessional contributions cap work?
‘Yes’ can also be the answer to the second part of the question (can I contribute $25,000 concessional and $450,000 non-concessional), assuming you are under the age of 60. For the 2013/2014 year, Australians aged 59 years and over on 30 June 2013 have a special annual concessional contributions cap of $35,000.
The concessional (before-tax) contributions cap for Australians aged 59 years or under is $25,000 for the 2013/2014 year. The $25,000 cap was supposed to be indexed in $5,000 increments in line with increases in Average Weekly Ordinary Times Earnings, but the former ALP government has froze the cap until July 2014.
For the 2014/2015 year, the general cap, which will be applicable for under-50s rises to $30,000. For individuals who are 49 years or over on 30 June 2014, your concessional cap is $35,000 (see table below).
Concessional contributions cap for 2014/2015 year (and earlier years)
|Income year||Under 50||50 years to 59 years*||60 years and over*|
|*If you are 59 years of age or older as at 30 June 2013 then you are eligible for the higher concessional cap of $35,000 for the 2013/2014 year. If you are 49 years of age or older as at 30 June 2014, then your concessional contributions cap for the 2014/2015 year is $35,000.|
Note: Any contributions in excess of these concessional (before-tax) caps are subject to extra tax or will need to be withdrawn from your super account. The excess concessional contributions then count towards an individual’s non-concessional (after-tax) cap.
How do the non-concessional contributions caps work?
Assuming an individual is under the age of 65, he or she can make up to $450,000 in non-concessional (after-tax) contributions in one year (for the 2013/2014 year), representing his or her annual $150,000 cap for three years. If you’re aged 65 years or over, the maximum amount of non-concessional contributions that you can make in one year is $150,000 (for the 2013/2014 year).
The non-concessional contributions cap is cap is $150,000 (for the 2013/2014 year) and up to $450,000 when taking advantage of the ‘bring-forward’ rule. The non-concessional (after-tax) bring-forward rule applies to individuals under the age of 65: Again, if an individual is 65 or over, he or she can only make after-tax contributions of up to $150,000 each year rather than $450,000 over a three-year period (which is available to those under the age of 65).
The rules outlined above mean that an individual can make a total of $175,000 (or $185,000 if 60 years or over) in super contributions in a year and remain within the contributions caps. Further, individuals under the age of 65 can take advantage of the bring forward rules for non-concessional contributions, which means you can contribute up to $450,000 in one year (for the 2013/2014 year), representing your non-concessional contributions cap over a three-year period.
An individual can then potentially make $475,000 (or $485,000 if 60 years or over) in super contributions in one year, subject to the specific contributions caps.
A couple could potentially contribute a combined $950,000 (or $970,000 if 60 years or over) in one year (for the 2013/2014 year).
Note: For the 2014/2015 financial year, the annual non-concessional cap increases to $180,000 and the bring-forward cap increases to $540,000. For the 2014/2015 year, an individual can potentially make $570,000 (or $575,000 if 50 years or over) in super contributions in one year, subject to the specific caps. A couple could contribute a combined $1,140,000 (or $1,150,000 if 50 years or over) in one year.
I also explain the two contributions caps elsewhere on the site. See the following SuperGuide articles for more information on the caps for the 2013/2014 year:
- Super concessional contributions: 2013/2014 survival guide
- Your 2013/2014 guide to non-concessional (after-tax) contributions
I will update the articles listed above for the 2014/2015 year in July 2014.