Superannuation contributions: Wearing two caps

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*
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 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Note: Any contributions in excess of these concessional (before-tax) caps are subject to extra tax or will need to be withdrawn from your super account.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:

I will update the articles listed above for the 2014/2015 year in July 2014.

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.

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