The government’s super contribution caps are changing. Contribution caps state the maximum amount you can contribute to your super each year and apply to all super accounts you may have. If you exceed the contribution caps, you may have to pay a penalty tax to the Australian Taxation Office (ATO) - so it’s important to know what the caps are.
Concessional (before tax) contributions
From 1 July 2017, you will be able to contribute a total of $25,000 to your super from your before tax salary each year. This cap applies to everyone, regardless of age. Previously the concessional contribution cap was set at $30,000 for those under 49 years of age, and $35,000 for those over 49 years of age.
Concessional contributions include:
- Compulsory contributions paid by your employer
- Salary sacrifice contributions, administration fees and insurance premiums paid by your employer
- Contributions allowed as an income tax deduction such as contributions you make if you are self-employed
- Notional taxed contributions if you are a member of a defined benefit fund.
‘Catching up’ on contributions
From 1 July 2018, if you have less than $500,000 in your super, you can carry forward unused cap space from up to five years prior. The government refers to this new measure as ‘catch-up’ concessional contributions. For example, if you have a super balance of $200,000 and took some time off work in 2018-2019 (and had no concessional contributions made into your account), when you returned in 2019-2020 you would be able to make $50,000 in concessional (before tax) contributions ($25,000 under the annual cap, and $25,000 from the 2018-19 cap you can carry forward).
Non concessional (after tax) contributions
From 1 July 2017, the new annual non-concessional contributions cap will come into effect, meaning you will be able to contribute a total of $100,000 into your super from your after tax salary. This new annual cap will replace the previous cap of $180,000. If your super balance is over $1.6 million you will no longer be able to make non-concessional contributions.
‘Bringing forward’ contributions
If you are under 65, you may be able to make non-concessional contributions of up to three times the annual non-concessional contribution cap in a single year. If you're eligble, this 'bring forward' arrangement will automatically be triggered if you have made a non-concessional contribution greater than the annual cap. Transitional arrangements apply if you have triggered the bring forward rule in either the 2015-2016 or 2016-2017 finanical years, and contributions made prior to 1 July 2017 will affect your non-concessional contribution cap over the following two years. For more information on the 'bring forward' arrangement, please see the ATO website.
Contribute before 30 June 2017!
The new caps are substantially lower than the previous caps, so if you’d like to boost your super before they come into effect, here are some tips to get you started:
- Check what concessional contributions have been made to all your super funds from 1 July 2016, also note how much you have personally contributed through non-concessional contributions.
- Estimate the amount of employer contributions that will be made for you before 30 June 2017 and how much you are contributing through salary sacrifice. You can use the ATO’s Estimate my super tool to work this out.
- The easiest way to make a non-concessional contribution is by contributing a one-off lump sum to your super via BPAY. You can find instructions on how to do this here.
- If you'd like to make a concessional contribution to your super, you'll need to arrange this with your employer. Find the request form here.