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?

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.

‘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. Australians aged 60 years and over 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, and is expected to increase to $30,000 for the 2014/2015 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 Government has frozen the cap until at least July 2014. The temporary, special cap for over-60s remains at $35,000, and will eventually merge into the general concessional cap.

Note: Any contributions in excess of these concessional (before-tax) caps are subject to extra tax, and these excess contributions then count towards an individual’s non-concessional (after-tax) cap.

I explain the two contributions caps elsewhere on the site (Super concessional contributions: 2013/2014 survival guide and Your 2013/2014 guide to non-concessional (after-tax) contributions), but briefly, assuming an individual is under the age of 65, he can make up to $450,000 in non-concessional (after-tax) contributions in one year, representing his 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).

© Copyright Trish Power 2009-2014

Copyright for this article belongs to Trish Power, and cannot be reproduced without express and specific consent.


IMPORTANT: SuperGuide does not provide financial advice. 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.

Comments

  1. Stephen Smith says:

    Prior to 1 July 2009, the income test that was applied to the Government's co-contribution scheme was identical to the income test applied in respect of tax deductible (member) contributions (namely, Assessable income from eligible employment plus reportable fringe benefits). From 1 July 2009, salary sacrificed super contributions count towards the co-contribution income test. Was there a similar change made in relation to the income test that applies to concessional contributions in the form of member tax deductible contributions. My understanding is that the income test applicable to tax deductible (member) contributions is that the member's assessable income plus reportable fringe benefits from eligible employment must be less than 10% of their total assessable income from all source. Is that still the case after 1 July 2009?

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