Making additional contributions can be a great way to help reach your retirement goals sooner, however going over the contribution limits can mean you have to pay extra tax.
Concessional contributions are contributions that are made before tax. Examples of concessional contributions include:
- Employer contributions such as Superannuation Guarantee;
- Salary sacrifice contributions; and
- Personal contributions claimed as a tax deduction.
Concessional contributions are taxed at 15% when they enter the fund, unless your annual income (including concessional super contributions) exceeds the threshold in which case they will be taxed at 30%. From 1 July 2017 this threshold was reduced to $250,000.
Concessional contributions are subject to a yearly limit. For 2019-2020, the concessional contributions limit is $25,000. If you exceed your concessional contributions limit, you may have to pay additional tax. For more information about the non-concessional contributions limit, please read Additional Information – How super is taxed or visit the Australian Taxation Office (ATO) website.
Non-concessional contributions are contributions that are made after tax. Examples of non-concessional contributions include:
- Personal contributions (where no tax deduction has been claimed);
- Spouse contributions; and
- Excess concessional contributions.
They are subject to a yearly limit, which for 2019-2020 is $100,000. If your super accounts (across all funds) exceed $1.6 million (indexed with CPI) at the previous 30 June, you will not be able to make any further non-concessional contributions. If you exceed your non-concessional contributions limit, you will be able to withdraw any excess non-concessional contributions or keep them in your super account and have a higher rate of tax applied.1 The ATO will contact you if this applies to you.
If you are aged under 65, you can bring forward two years of non-concessional contributions, giving you a maximum limit of $300,000 over three years. Making contributions in excess of the non-concessional contributions limit will automatically trigger the bring forward rule. If your super balance (across all Funds) is close to $1.6 million, you will only be able to bring forward the annual limit amount for the number of years that would take your balance to $1.6 million.
For more information about the concessional contributions limit and bring forward arrangements, please read Additional Information – How super is taxed or visit the Australian Taxation Office (ATO) website
Additional Information - How super is taxed 196.4 KB PDFDownload
1 This applies to contributions made from the 2013/14 financial year onwards, plus associated earnings. Individuals who have made excess non-concessional contributions have the option to either:
a. Withdraw excess non-concessional contributions and 85% of the earnings. These earnings will then be included in your income tax assessment; or
b. Keep the excess non-concessional contributions in their super account and they will be taxed at the top marginal tax rate (49%).