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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 top 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 build your retirement savings through personal contributions, check out SuperGuide’s 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.
There is no 15% contributions tax payable on non-concessional (after-tax) contributions when they are added to your super account as you have already paid tax on this money.
What types of contributions are non-concessional?
From 1 July 2017, there are several types of non-concessional (after-tax) contributions:
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- 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.
- 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.
- Downsizer contributions can be made if you’re aged 65 or older and sell your home. You do not need to meet a work test or have a Total Super Balance under $1.6 million. Importantly, downsizer contributions are not counted towards your non-concessional contributions cap (see section below). For more information, read SuperGuide article Making downsizer super contributions: 10 things you need to know.
- 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 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?
Using a bring-forward arrangement can be handy if you receive a financial windfall such as an inheritance, or sell a large asset and would like to contribute an amount above your annual contributions cap.
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.
The annual cap for non-concessional contributions for 2020/21 is $100,000. This cap increases in line with indexation of the concessional (before-tax) contributions cap.
|Total Superannuation Balance* on 30 June 2020||Amount you can contribute||Contributions tax payable|
|Under $1.6 million||$100,000 |
$300,000 over a 3-year period if you use a bring-forward arrangement and meet the age and Total Superannuation Balance limits, plus other eligibility criteria
|Over $1.6 million||Nil||47% if left in super account|
*Total Superannuation Balance includes all concessional contributions and reportable fringe benefits.
Non-concessional contributions caps in 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.
Need to know
When calculating your non-concessional contributions each year, the ATO counts both your personal and spouse contributions.
If you go over your concessional contribution cap ($25,000 in 2020/21), the excess contributions are also counted towards your non-concessional contributions cap.
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 contribution cap ($100,000 in 2020/21) is much higher than the concessional contributions cap ($25,000 in 2020/21), 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 (2020/21) from the government. To be eligible, you must not have exceeded your non-concessional contributions cap in the relevant financial year.
Learn more about how the super co-contribution works.
Jenny is aged 43 and earns an annual salary of $90,000 as an office manager. Her total superannuation balance (TSB) is currently $850,000.
Jenny owns a share portfolio currently valued at $55,000 and she would like to use this money to help grow her retirement savings.
Jenny decides to sell her shares and move the money into the lower taxed environment of her super account. She pays some capital gains tax (CGT) on profits she makes when selling the shares and decides to deposit $49,500 into her super account as a non-concessional contribution. Jenny then invests in a broadly diversified range of shares within her super account.
Despite paying CGT, over the long term Jenny benefits from paying a lower tax rate (15%) on the investment earnings from the shares in her super account than the one applying to investment earnings outside the super system. When she eventually retires after age 60, she will be able to receive her non-concessional contribution money tax free.
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 Transfer Balance Cap ($1.6 million in 2020/21) 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).
If your TSB was $1.6 million or more on 30 June of the previous financial year, you will not be able to make any non-concessional contributions in the current financial year without triggering an excess contribution and paying additional tax on the contribution.
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 two additional years of non-concessional contributions so you can make a higher contribution in a single year (up to $300,000 in one year). The amount you can bring-forward depends on your Total Superannuation Balance. For more information, read SuperGuide article A super guide to understanding the bring-forward rule.
Need to know
Following removal of the work test requirements for fund members aged 65 and 66 who wished to make non-concessional contributions, accompanying legislation is going through Parliament to cover the bring-forward rules.
At the time of writing, the legislation is still before the House of Representatives, but has yet to be passed and come into effect.
Annual contribution limits for non-concessional contributions using a bring-forward arrangement
|Total superannuation balance||Maximum contribution||Accounts for contribution caps in|
|$0 – $1.4 million||$300,000||Current year + following 2 years|
|$1.4 – $1.5 million||$200,000||Current year + following year|
|$1.5 million – $1.6 million||$100,000||Current year|
|$1.6 million and over||Nil||Current year|
Once you reach age 67, your non-concessional contributions cap is a flat $100,000 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.
Need to know
You cannot claim a tax deduction for personal contributions you want to keep as non-concessional (after-tax) contributions.
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