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When it comes to building a retirement nest egg, most people realise their employer is doing most of the heavy lifting through their regular Superannuation Guarantee (SG) contributions.
But that’s not the only way to build up your super account. You can also make contributions into your super account from your take-home pay or savings outside the super system.
If you’re interested in learning more about how to boost your retirement savings through personal super contributions, SuperGuide has prepared this simple guide to non-concessional contributions.
What is a non-concessional super contribution?
For most employees, their employer’s SG contributions are part of their salary package and they are made from money that has not yet been taxed. When this money goes into your super account, it’s taxed concessionally at the special low rate of 15% (the contributions tax).
On the other hand, if you decide to make personal contributions into your super account, they will come from money that has already been taxed at your normal tax rate. These contributions are called non-concessional (or after-tax) contributions because tax has already been paid or deducted from the money you use to make the contribution.
What types of contributions are non-concessional?
From 1 July 2017, there are several types of non-concessional (after-tax) contributions:
- Personal contributions you make and don’t claim as a tax deduction in your income tax return. These are often called ‘voluntary’ contributions and can be either a large lump sum or small regular amounts from your wages or salary.
- Contributions you or your employer make from your after-tax income
- Spouse contributions are made directly into your spouse’s super account. This can be a tax-effective way for a couple to save for retirement if one partner is only working part time, or has a low income. For more information, see SuperGuide article Contribution splitting: How to boost your spouse’s super.
- Excess concessional (before-tax) contributions you have not released from your super fund
- First Home Super Saver (FHSS) Scheme contributions can be classed as either concessional or non-concessional contributions. For more information, read SuperGuide article How does the First Home Super Saver (FHSS) Scheme work?
- Retirement benefits you withdraw from your super and re-contribute and for which you have not claimed a tax deduction are classified as non-concessional. For more information, read SuperGuide article What is a re-contribution strategy and how can I use it with my super?
What is the non-concessional contributions cap?
There are annual caps (or limits) on the amount of non-concessional contributions you can make into your super account. This cap increases in line with indexation of the concessional (before-tax) contributions cap.
The generalannual cap for non-concessional contributions for 2021-22 is $110,000. From 1 July 2017 to 30 June 2021 the general non-concessional contributions cap was $100,000.
Your individual non-concessional cap may be different from the general annual non-concessional contributions cap. It can be higher if you use a bring-forward arrangement, or nil if your Total Superannuation Balance (TSB) is greater than or equal to the general transfer balance cap ($1.7 million in 2021-22). For more details, see the Bring-forward section later in the article.
Non-concessional contributions caps in the current and previous financial years
|Income year||Amount of cap*|
*These caps are subject to any bring-forward arrangements commenced in early years. For more information, read SuperGuide article What to do if you exceed your super contributions caps.
Three types of contributions don’t count towards your non-concessional contributions cap:
- Personal injury payments
- Contributions you chose to count towards your CGT cap that don’t exceed your lifetime limit. For more information, read SuperGuide article The small business retirement exemption explained.
- Downsizer contributions from selling your home. For more information, read SuperGuide article Making downsizer super contributions: 10 things you need to know.
These contributions are only excluded if you meet all the conditions and specifically ask your fund to exclude them by providing the necessary paperwork.
5 reasons non-concessional contributions are valuable
1. No contributions tax
When you make non-concessional contributions with your after-tax money, there is no 15% contributions tax payable as they enter the super system.
2. Lower tax on investment earnings
The tax rate on any investment earnings in your super account is a maximum of 15%, which is often a lot lower than the tax rate on your investment earnings outside the super system.
3. Tax-free withdrawal
When you receive your super savings in retirement, your non-concessional contributions are returned to you tax free.
4. Higher contributions cap
The non-concessional contributions cap ($110,000 in 2021-22) is much higher than the concessional contributions cap ($27,500 in 2021-22), which means you can add more to your retirement nest egg.
5. Potential government co-contribution payment
If you make a personal after-tax contribution, you may qualify for a co-contribution payment of up to $500 (2021-22) from the government. To be eligible, you must not have exceeded your non-concessional contributions cap in the relevant financial year.
Am I eligible to make non-concessional contributions?
To make a non-concessional contribution into your super account, you must meet several eligibility criteria:
1. Total Superannuation Balance limit
You must have a Total Superannuation Balance (TSB) of less than the general Transfer Balance Cap ($1.7 million in 2021-22; $1.6 million from 2017-21) on 30 June of the previous financial year. You also need to have available space under your non-concessional contributions cap based on the contributions you have made in previous years (see bring-forward section below).
2. Age limit and work test
From 1 July 2020, if you are aged under 67 you are eligible to make a non-concessional contribution even if you are not working.
You may also be able to bring-forward up to two additional years of non-concessional contributions so you can make a higher contribution in a single year (up to $330,000 in one year from 1 July 2021). The amount you can bring-forward depends on your age and your Total Superannuation Balance.
Annual contribution limits for non-concessional contributions using a bring-forward arrangement
|Total superannuation balance at 30 June of the prior financial year||Maximum contribution||Accounts for contribution caps in|
|$0 to less than $1.48 million||$330,000||Current year + following 2 years|
|$1.48 to less than $1.59 million||$220,000||Current year + following year|
|$1.59 million to less than $1.7 million||$110,000||Current year|
|$1.7 million and over||Nil||Current year|
Once you reach age 67, your non-concessional contributions cap is currently a flat $110,000 a year and you need to meet the requirements of the work test or the work test exemption. For more information, read SuperGuide article Work test: Making super contributions over 67.
Once you reach age 75, you generally cannot make non-concessional contributions – even if you are still working.
How do I make a non-concessional contribution?
Making a non-concessional contribution is easy, with most super funds allowing you to make them using payment systems like cheque, BPay or electronic funds transfer.
You can make a non-concessional contribution as a single lump sum or as lots of smaller contributions throughout the year – it’s up to you.
You don’t need to notify the ATO you are making a non-concessional contribution, since most super funds usually assume voluntary member contributions are non-concessional contributions unless you inform them otherwise.