Concessional
Contribution Caps
One of the many changes to the Australian superannuation
system that commenced on 1 July 2017 was the modification of concessional
contribution caps.
What is a concessional contribution?
Concessional Contributions are contributions made into your self-managed
super fund (SMSF) that are included in that SMSF’s assessable income. Such
contributions are taxed in your SMSF at a ‘concessional’ rate of 15%, often
referred to as ‘contributions tax’. The most common types of concessional
contributions are employer contributions, such as super guarantee and salary
sacrifice contributions. They may also include personal contributions made by
the member for which the member claims an income tax deduction.
What is a contribution cap?
Contribution caps limit the amount that can be contributed
for a member each financial year. Caps are indexed annually and a member whose
total contributions in a year exceed the contribution caps may be liable for
additional tax on the excess contributions.
What are the changes?
As of 1 July 2017, the 10% maximum earnings condition for
personal super contributions deductions no longer applies for the 2017-18 and
future financial years.
The concessional contributions cap was previously $35,000
for people 49 years and older at the end of the previous financial year and
$30,000 for everyone else. Effective 1 July 2017, the concessional
contributions cap is $25,000 for everyone, regardless of age. This new cap will
be indexed in line with average weekly ordinary time earnings (AWOTE), and
rounded down to the nearest $2,500.
Furthermore, from 1 July 2018, you are able to
‘carry-forward’ any unused amount of your concessional contributions cap. This
gives you the ability to access unused concessional contributions on a rolling
basis for five years, however amounts carried forward that are not used after
five years will expire. 2019-20 is the first year that you can access unused
concessional contributions. There is also a provision that you can only
carry-forward your unused concessional contribution cap if your total superannuation
balance is less than $500,000 at the end of 30 June of the previous financial
year.
