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What is classed as a contribution to super?

December 23, 2018

December 23, 2018

We all want to retire with as much money as possible but there are limits on how much we can contribute into our superannuation funds and if we exceed them it can be painful. Being aware of what’s counted can make contributing to super pain-free!

These limits, known as ‘contributions caps’, are as follows:

Concessional (before tax) contribution cap - $25,000 per annum

Non-concessional (after tax) contribution cap - $100,000 pa or $300,000 over three years

Superannuation is extremely complex and it’s hard to remember what counts towards the various limits. The following contributions are included in the concessional contribution cap above:

  • Your Superannuation Guarantee contributions.
  • Any salary sacrificed contributions.
  • Fund administration fees or life insurance premiums paid direct by the employer.
  • Transfers from reserves, transfers from foreign funds that are in excess of the member’s vested benefits and some transfers from Superannuation Holding Accounts may be counted.
  • The taxable component in excess of $1 million of an Employer Termination Payment that has been directed to a superannuation fund.

It’s important to note that Super Guarantee contributions on salaries of more than $263,000 per year will be in breach of their caps without anything else being counted.

What happens if you breach the caps?

For concessional contributions, the penalties take two forms:

  1. The member will receive an assessment for tax on the excess contributions at the taxpayer's marginal tax rate less a 15% offset for the contributions tax already paid.
  2. The excess concessional contributions are added to non-concessional contributions to be counted towards those caps.

Fund members breaching the caps will have the option of receiving a refund of excess contributions, which will be taxed as normal income. This option will only be available in the first year of breach.

For non-concessional contributions:

  • Excess concessional contributions are added to non-concessional contributions to determine if the $100,000 cap has been breached. If it has, the $300,000 three-year cap is triggered. (This means that no more than $300,000 can be contributed over the three-year period from the beginning of the financial year in which the original contributions are made.)

    Contributions in excess of $300,000 over three years must be withdrawn from the super fund and any income earned on those contributions will be taxed as income at the taxpayer's marginal rate of tax.
  • Be aware that if you are assessed to have exceeded your contributions your assessment is accompanied by a compulsory release authority, which requires the fund to release sufficient money to pay the tax. The regulatory authorities consider that this satisfies a condition of release for preservation purposes.

This is a tricky area that regularly catches out many Australians. Speak to our financial planner today about your superannuation and make sure you are staying within your limits.

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The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, so you should consider your own financial position, objectives and requirements and seek personalised advice before making any financial decisions.