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Disclaimer

This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in these articles is for guidance only and should not be relied upon without obtaining professional advice having regard to your direct circumstances.

 

Concessional & Non Concessional Super Contributions

Superannuation contributions can be made either before tax (referred to as concessional) or after tax (non-concessional). Concessional contributions comprises your employer’s compulsory 9% superannuation guarantee payments and any salary sacrificed contributions that is deducted from your before tax wages.

Concessional superannuation contributions are subject to a flat 15% tax, regardless of your taxable income. Therefore, to get the best benefit tax-wise from salary sacrificing to your super your marginal tax rate should be higher than 15c in the dollar.

As non-concessional superannuation contributions are sourced from your after-tax income no tax is payable on this type of contribution.

A contribution cap applies to both types of super contributions, and last year the cap for concessional contributions was halved. The cap is now $25,000 – down from $50,000 in the 08/09 financial year.

A transitional cap for concessional contributions for people aged 50 years or over has also been halved from $100,000 in the 08/09 year. This transitional cap is now at $50,000 and will remain in place until 30 June 2012, when it will revert back to the normal $25,000 concessional cap.

The non-concessional contributions cap was kept at $150,000. However, due to new rules introduced in the Federal Budget, both concessional and non-concessional caps are unlikely to be increased for at least six years.

If you exceed your concessional contributions cap the excess contributions are liable to a penalty tax of 31.5% in addition to the 15% tax on all contributions. Excess concessional contributions also count towards your non-concessional contributions cap.

If you make concessional contributions through salary sacrifice you should be mindful of the cap now in place to ensure you do not exceed it and end up paying unnecessary penalty taxes.  

After-tax contributions that exceed the cap of $150,000 are also subject to a penalty tax of 46.5%. However, if you are under the age of 65 and you exceed your annual contributions cap then the “bring-forward rule” applies. This rule allows you to bring forward up to two years of non-concessional super contributions in one year. For example, if you contributed up to $450,000 from your after-tax income in the 2008/2009 financial year, then the “bring-forward” rule applies for the next two years. In this circumstance you will not be able to make any more non-concessional super contributions until the 2011/2012 financial year.

If you are not employed, self employed or you only receive a small proportion of your income from an employer then you can make concessional contributions to your superannuation fund. These contributions may be claimed as a deduction on your personal tax return.

If you are aged 65 years or over you need to satisfy a work test to be able to make voluntary super contributions. This test involves working 40 hours in a 30 day period in the financial year in which you wish to make contributions.

 


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