Contribution limits
Super attracts tax breaks because the Australian Government wants to encourage Australians to support themselves in retirement, rather than rely solely on the Age pension.
Tax breaks make super an attractive investment, but you should be aware that limits or ‘caps’ do apply to contributions made by you or your employer into your super account. If these caps are exceeded, extra tax is applied. Currently caps are applied to concessional contributions and non-concessional contributions.
Concessional contributions cap
Concessional contributions caps refer to the limit on concessional contributions a person can contribute to their super in any given year.
Concessional contributions include:
- Employer contributions (9% Super Guarantee and any additional employer contributions)
- Salary sacrifice contributions (contributions to super from your before tax salary, made by arrangement with your employer)
- Self employed deductible contributions.
The concessional contributions cap is $25,000 each year for people under age 50 and $50,000 for people age 50 and over (until 30 June 2012).
If you exceed the concessional contributions cap you will be taxed an additional 31.5% on the excess contributions amount. These excess contributions will also count towards the non-concessional contributions cap.
To ensure your contributions stay within the limits, members who contribute to super on a before tax basis (salary sacrifice) or receive employer contributions above 9% should review their contributions strategy regularly.
Non-concessional contributions cap
Non-concessional contributions include additional voluntary contributions you make to your super from your after tax salary. Non-concessional contributions are not taxed when they are paid to your account, because you have already paid income tax on this money.
For the 2010/2011 financial year the cap on non-concessional contributions limits remains $150,000, or 6 times the concessional cap.
Any non-concessional contributions made to your super account above the $150,000 limit is taxed at 46.5% on the excess contributions made.
People under age 65 are currently allowed to exceed this cap under ‘bring-forward’ rules. Under the rules, up to $450,000 of non-concessional contributions can be made over a three year period. The bring-forward rule is triggered when you make more than $150,000 of non-concessional contributions in a financial year.
This cap is the total non-concessional contributions a person can make to all superannuation funds.
More information
A financial adviser can provide you with professional financial advice about appropriate contribution strategies for your personal circumstances, if you require it.
More details about tax on super contributions can be found within our tax pages.