The contribution caps limit the amount that can be contributed for a member each financial year. The caps are indexed annually. A member whose total contributions in a year exceed the contribution caps may be liable for additional tax on the excess contributions.
There are several ways you can contribute into the super and the methods of contributing are largely aged based.
If you are still working, generally you will be able to contribute via concessional or non-concessional contributions.
Concessional contributions are contributions made into your SMSF that are included in the SMSF’s accessable income. These contributions are taxed in your SMSF at a ‘concessional’ rate of 15%, which is often referred to as ‘contributions tax’.
The most common types of concessional contributions are employer contributions, such as super guarantee and salary sacriﬁce contributions. Concessional contributions also include personal contributions made by the member for which the member claims an income tax deduction.
Concessional contributions are subject to a yearly cap.
From 1 July 2017, the general concessional contributions cap is $25,000 for all individuals regardless of age.
From 1 July 2018, members can make ‘carry-forward’ concessional super contributions if they have a total superannuation balance of less than $500,000. Members can access their unused concessional contributions caps on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire.
The first year in which you can access unused concessional contributions is the 2019–20 financial year.
Generally, non-concessional contributions are contributions made into your SMSF that are not included in the SMSF’s assessable income. The most common type is personal contributions made by the member for which no income tax deduction is claimed.
Non-concessional contributions also include excess concessional contributions for the ﬁnancial year. They do not include super co-contributions, structured settlements and orders for personal injury or capital gains tax (CGT) related payments that the member has validly elected to exclude from their non-concessional contributions.
From 1 July 2017, the non-concessional contributions cap is reduced to $100,000 for members 65 or over but under 75. Members under 65 years of age will have the option of contributing up to $300,000 over a three-year period for members depending on their total superannuation balance.
The contribution and bring forward available to members under 65 is outlined in the following table.
|Total superannuation balance
|Contribution and bring forward available
|Less than $1.4 million
|Access to $300,000 cap (over three years)
|Greater than or equal to $1.5 million and less than $1.6 million
|Access to $200,000 cap (over two years)
|Greater than or equal to $1.5 million and less than $1.6 million
|Access to $100,000 cap (no bring-forward period, general non-concessional contributions cap applies)
|Greater than or equal to $1.6 million
The total superannuation balance is determined on 30 June of the previous financial year.
Other methods of contributing to your fund
It’s possible to contribute super on behalf of your spouse and in turn receive a tax offset of up to $540 per annum. To be eligible your spouse must be eligible to receive the contribution. In other words, they must be under the age of 65 or if over 65 they must meet the work test of at least 40 hours of paid employment within a 30 day period. For you to be eligible for the full offset your spouse must have less than $37,000 in income. If their income is between $37,000 and $40,000 a partial offset can still be received.
Small Business CGT Exemptions
Individuals have a lifetime CGT cap which for 2020 financial year is set at $1,515,000. This cap allows a contribution to be made into the superannuation environment funded by the proceeds of certain small business assets. This cap operates completely independent to the concessional and non-concessional caps. This cap can be accessed via either the 15-year exemption or the retirement exemption. The retirement exemption is capped at a lifetime limit of $500,000. For members under 55, the exempt amount must be paid into a complying super fund or a retirement savings account.
To be eligible to contribute this amount the following conditions must be met. Firstly the business must have an annual turnover of less than $2 million. The asset was utilised in close connection with the small business and the member has net assets of less than $6 million. This cap excludes personal assets such as the family home assuming it has not been used in the business to produce any income.
Government Co Contribution
This incentive was introduced by the government in the 2003 financial year and is designed to assist members who earn less than a prescribed amount boost their retirement savings.
Typically, a member over the age of 65 who does not meet a work test cannot contribute into super. From 1 July 2018 the government have introduced the downsizer contribution. This contribution can only be made by members over the age of 65 who have sold their family home and the contract was entered after 1 July 2018. The good news is that the contribution is not caught under the concessional or non-concessional caps and eligibility won’t be impacted even if a member has over $1.6 million in the superannuation environment. The only cap it will be included in is the $1.6 million Transfer Balance Cap.
There are many ways to build up your retirement nest egg, whether it be via the conventional contribution method or by taking advantage of the other contribution methods and in all cases it’s important to assess your eligibility criteria. You should always obtain the appropriate advice surrounding the making of any type of contribution to ensure you stay within the various guidelines and allocated caps.
We make monitoring contributions easy via our online reports and dashboard. At the click of a mouse you can see a break down by member of contributions made year to date. This is particularly useful if you are seeking strategies to get more money into your SMSF.
For further queries please call us on 1300 845 901.
This information is provided by ExpertSuper™ Pty Ltd ACN 628 032 888 (Authorised Representative No. 1274492). The information is general information only and does not take into account your objectives, financial situation or needs. You should obtain professional advice before acting on any of this information. Please refer to ExpertSuper’s FSG (available at https://www.expert-super.com.au/wp-content/uploads/2020/02/ES-Financial-Services-Guide.pdf) for contact information and information about any remuneration and associations with product issuers.