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There’s a limit to how much you can contribute into your superannuation each year. The limits vary for each type of contributions and the government may change them from year to year.
Concessional contributions are contributions made into your SMSF that are included in the SMSF’s assessable 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.
From 1 July 2017, the general concessional contributions cap is $25,000 for all individuals regardless of age.
The limits have increase to $27,500 from 1 July 2021 for all individuals regardless of age.
Based on the recent changes, if you don’t use the full amount of your concessional contribution cap ($27,500 in 2021/22, $25,000 in 2019/20 and 2020/21), you can carry forward the unused amount and take advantage of it up to five years later. After five years, any unused amounts expire.
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.
From 1 July 2021, the non-concessional contributions cap is $110,000 for members 65 or over but under 75. Members under 65 years of age will have the option of contributing up to $330,000 over a three-year period for members depending on their total superannuation balance.
You can read more on the ATO website or simply give us a call if unsure as there are tax implications of exceeding your contribution limit.
For most Australians, concessional contributions are the most common type of contributions appearing on their annual super fund statement.
They are the before tax contributions – employer, salary sacrifice or contributions that you have claimed a deduction for in your personal tax return.
The fund pays tax on these contributions at 15%.
Non concessional contributions are after tax contributions, i.e. contributions you did not claim a deduction for.
They are not taxed in the fund, nor are they taxable when taken out.
Carry-forward contributions were introduced to make it easier for people with interrupted or non-standard work patterns to save for their retirement and to benefit from the tax concessions available in the super system.
To make a carry-forward contribution, your Total Super Balance (TSB) must be under $500,000 at 30 June in the previous financial year.
If so, you can carry forward unused cap of concessional contributions.
The first financial year in which you could access your unused concessional contributions cap was 2019/20.
From 1 July 2018, if you are 65 years old or older and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.
Your downsizer contribution is not a non-concessional contribution and will not count towards your contributions caps. The downsizer contribution can still be made even if you have a total super balance greater than $1.6 million.
Concessional contributions are taxed at 15%.
Non concessional contributions are not taxed in the fund.
You can’t claim a deduction for superannuation contributions paid by your employer directly to your super fund from your before-tax income such as:
You may be able to claim a tax deduction for personal super contributions that you made to your super fund from your after-tax income, as long as you lodge “Notice of intention to claim deduction” form and that your super deduction does not create loss.