Although you can put as much money as you like towards your superannuation, there are also limits on how much you can contribute before you pay extra tax. These varying limits are known as caps and vary depending on the type of contributions made into your superannuation fund.
Aside from your compulsory super contributions (9.25%) from your employer, you can also contribute extra to your super at any time to help you work towards your future.
Concessional contributions are those contributions made into your super fund before any tax is paid on them. These contributions include: compulsory super payments (super guarantee) made by your employer, salary sacrifice contributions, costs your employer pays on your behalf (super administration fees and insurance premiums) and some personal contributions (super payments you make if you if you’re self-employed).
On the other hand, there are non concessional contributions, these are contributions generally made into your super fund after tax has been paid on them. These include: personal contributions you make from your after-tax pay that you are not allowed to claim as an income tax deduction and contributions your spouse makes to your fund on your behalf.
The contribution cap varies depending on how old you are. For the 2013-14 financial year, the general concessional contributions cap for those younger than 60 years old in the 2013-14 financial year is $25,000. However, if you turn 60 years or older in 2013-14 you can contribute up to $35,000 before you may have to pay extra tax. If you turn 50 years or older in 2014-15, you can contribute up to $35,000 before you may have to pay extra tax.
So what happens if you accidentally go over a cap? From July 1 2013, your excess concessional contributions will be included in your assessable income and be taxed at your marginal rate (plus an interest charge). To assist you in paying the additional bill, you may release up to 85% of the excess concessional contributions from your super fund. You can only release up to 85% because 15% contributions tax has already been paid by your super fund. Released contributions will no longer be counted as non-concessional contributions.
Another tip is to make sure you check your contributions regularly to make sure you aren’t going to exceed the caps. If you salary sacrifice and are close to exceeding, you should consider reducing your salary sacrifice amounts.
If you have any questions or need additional information about concessional contributions, please feel free to contact us.
