- 1. What counts as a concessional contribution?
- 2. What is the concessional contributions cap for the 2017/2018 year?
- 3. Is there a special concessional cap for over-50s?
- 4. I heard I can make extra concessional contributions if I have less than $500,000 in super. Is that true?
- 5. My employer won’t let me salary sacrifice. Can I make tax-deductible super contributions?
- 6. I am self-employed. What is my concessional contributions cap?
- 7. I want to make concessional contributions for the 2017/2018 year, and split the contributions with my wife so they are directed to her super account. Can I?
- 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?
- 9. What happens if I exceed my concessional contributions cap for the 2017/2018 year (or for the 2016/2017 year, or 2015/2016 or 2014/2015 years)?
- 10. Will the annual concessional contributions cap be indexed?
- For more information on super contributions…
We receive many questions about the concessional contributions caps. We regularly update readers on any 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 concessional contributions cap.
Note: Anyone earning an adjusted taxable income of more than $250,000 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 $250,000. The additional 15% tax for high-income earners is known as Division 293 tax. Before July 2017, Division 293 tax applied to individuals earning an adjusted taxable income of $300,000 (rather than $250,000). 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.
Note: If you belong to a super fund where the employer pays for administration fees and insurance premiums, rather than being deducted directly from your super account, then the portion attributable to your account will be counted as a concessional contribution.
Defined benefit funds: Defined benefit funds have special rules in relation to how employer contributions are counted towards a person’s concessional contributions cap.
SMSFs: If any fund reserves are transferred to a fund member’s account, special rules apply when counting these amounts towards a person’s concessional contributions cap.
2. What is the concessional contributions cap for the 2017/2018 year?
The concessional contributions cap for the 2017/2018 year is $25,000 for all age groups. The special cap for over-50s has been abolished.
For the 2016/2017 financial year: The concessional contributions caps for the 2016/2017 financial year (1 July 2016 through to 30 June 2017) were:
- $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).
3. Is there a special concessional cap for over-50s?
No. The annual concessional contributions cap of $25,000 applies to all age groups. Over time, the annual cap will be indexed, but there is no special contributions cap for over-50s.
Note: For the 2016/2017 year, if you were aged 49 years or over on 30 June 2016, then your concessional cap was $35,000 for the 2016/2017 financial year. If you were aged 48 years or under on 30 June 2016, then your concessional cap was $30,000 for the 2016/2017 year.
4. I heard I can make extra concessional contributions if I have less than $500,000 in super. Is that true?
Yes and no. From 1 July 2018, if your total superannuation balance (including combined balances if you have more than one super account) is less than $500,000 at the end of a financial year, then you have the opportunity to utilise the unused portions of your concessional caps from previous years (up to 5 years’ worth) in the following financial year, or future years.
Yes, you can make catch-up concessional contributions, but no, it is not extra concessional contributions. The measure is only available for unused portions of a person’s concessional cap for the previous 5 years. For more information, see SuperGuide article Super opportunity: Catch-up concessional contributions from July 2018.
Important: The unused cap amounts can start to be carried forward from 1 July 2018, that is, from the start of the 2018/2019 financial year, which means the 2019/2020 year is the first financial year that individuals can take advantage of unused cap amounts from previous financial years.
5. My employer won’t let me salary sacrifice. Can I make tax-deductible super contributions?
Since 1 July 2017, employees can make tax-deductible super contributions. Employees can also make salary sacrifice super contributions (subject to employer’s agreement). Total concessional contributions (including Superannuation Guarantee contributions) count towards the annual $25,000 contributions cap. For more information, see SuperGuide article Employees can now make tax-deductible super contributions (since July 2017).
Note: Before July 2017, if an individual satisfied the 10% income test, they could make tax-deductible super contributions, even as an employee (see SuperGuide article Tax-deductible super contributions: No longer need to meet 10% income test).
6. I am self-employed. What is my concessional contributions cap?
Self-employed Australians are subject to the same annual contributions cap as employed Australians (that is $25,000 for the 2017/2018 year).
Note that you must also satisfy other requirements when making tax-deductible super contributions. For example, an individual 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 (available to both employees and self-employed), see SuperGuide article Who can make tax-deductible super contributions?
7. I want to make concessional contributions for 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. 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 2017/2018 year can only be split during the 2018/2019 year. Contributions made during the 2018/2019 year can only be split during the 2019/2020 financial year.
The full amount of the original contributions counts towards your concessional contributions cap, not your spouse’s cap. For more information on contributions splitting see the following SuperGuide articles:
- Contributing to your spouse’s super account (4 Q&As)
- Super for beginners, part 7: Can I split my super benefits with my spouse?
- Boost your spouse’s retirement kitty: 10 things you need to know
Important: Anyone earning an adjusted taxable income of more than $250,000 must pay 30% tax on concessional contributions paid into a super fund (rather than 15%). For more information, see SuperGuide article Double contributions tax for more high-income earners.
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 2017/2018 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. For more information, see SuperGuide article Over-65s work test: How does it operate?
Note: Volunteer work does not count towards the 40-hour work test.
9. What happens if I exceed my concessional contributions cap for the 2017/2018 year (or for the 2016/2017 year, or 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. For more information, see SuperGuide article Excess contributions rules: A quick summary.
10. Will the annual concessional contributions cap be indexed?
Yes. The annual $25,000 concessional cap will be indexed periodically, in $2,500 increments, rounded down to the nearest multiple of $2,500. Indexation will be in line with the annual increase in full-time average weekly ordinary time earnings (AWOTE).
For more information on super contributions…
Check out the following SuperGuide articles: