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How does it work?

There are many important tax benefits associated with investing in super. But to make the most of these benefits you need to understand the different types of super contributions, and be aware of the limits (referred to as ‘caps’) that exist on how much you can contribute to super tax-effectively each financial year.


The two main types of contributions that have a cap are:

  • Concessional (before-tax) contributions – these are generally made to a super fund by your employer, or if you’re self-employed, those made by you for which you claim a tax deduction. Examples include Superannuation Guarantee (SG) contributions, salary sacrifice amounts, and any amount allowed as a personal deduction in your income tax return.
  • Non-concessional (after-tax) contributions – these are personal super contributions which you or your spouse makes for you with after-tax income.


The following table shows the caps that currently apply to both concessional and non-concessional contributions. It also details the extra tax that would apply to any amounts that exceed the cap.

 

What does it mean for me?

There are two key reasons why you need to know exactly what these amounts are:

  • If you haven’t reached your concessional contributions cap, there may be an opportunity to boost your super and reduce your potential taxable income this financial year by making salary sacrifice contributions to super.
  • If you have reached your cap, you may be subject to penalty tax on any excess super contributions you make before 30 June as per the table below..

 

    Concessional contributions Non-concessional contributions
Maximum contributions allowed (2014/15)   $30,000 cap or $35,000 if aged 493 and over. $180,000 cap
Tax on amounts over the cap Excess contributions released from super Included in your assessable income for the financial year and taxed at up to 47%4  including Medicare Levy N/A1
  Excess contributions retained in super  Up to 32%4 including Medicare Levy (on top of the 15% paid by the super fund) 47%4  including Medicare Levy 
Important information   Any concessional contributions in excess of the cap which are not released from super will also count towards your non-concessional contributions cap If you are 64 years old or under on 1 July, you may be able to bring forward the next two years’ worth of non-concessional contributions. This effectively allows you to contribute up to $540,0002 in one financial year.

1. At the time of writing the Government proposal to allow the refund of excess non-concessional contributions and the associated earnings has not become law.
2. Please note if you triggered the ‘bring forward non-concessional cap’ in the 2012/13 or 2013/14 financial year, your relevant nonconcessional cap under this rule will be $450,000 until the end of the 3 year period. For further information contact your financial adviser. 
3. Age as at 30 June 2014.
4. Excludes the Temporary Budget Repair Levy which may apply in 2014/15, 2015/16 and 2016/17.

Strategy in action

Chris wants to make the most of his super contributions. He will have contributed a total of $12,000 to his super fund by the end of this financial year through employer SG.

Chris decides to enter a salary sacrifice agreement for the balance of this financial year to increase the level of concessional contributions made to his super fund, however, he’s mindful not to exceed the cap of $30,000.

Chris can make an additional $18,000 (i.e. $30,000 – $12,000) in salary sacrifice contributions before he reaches his cap, giving his super a tax-effective boost.

 

How to get more from your Super

    Concessional contributions Non-concessional contributions
Maximum contributions allowed (2014/15)   $30,000 cap or $35,000 if aged 493 and over. $180,000 cap
Tax on amounts over the cap Excess contributions released from super Included in your assessable income for the financial year and taxed at up to 47%4  including Medicare Levy N/A1
  Excess contributions retained in super  Up to 32%4 including Medicare Levy (on top of the 15% paid by the super fund) 47%4  including Medicare Levy 
Important information   Any concessional contributions in excess of the cap which are not released from super will also count towards your non-concessional contributions cap If you are 64 years old or under on 1 July, you may be able to bring forward the next two years’ worth of non-concessional contributions. This effectively allows you to contribute up to $540,0002 in one financial year.

    Concessional contributions Non-concessional contributions
Maximum contributions allowed (2014/15)   $30,000 cap or $35,000 if aged 493 and over. $180,000 cap
Tax on amounts over the cap Excess contributions released from super Included in your assessable income for the financial year and taxed at up to 47%4  including Medicare Levy N/A1
  Excess contributions retained in super  Up to 32%4 including Medicare Levy (on top of the 15% paid by the super fund) 47%4  including Medicare Levy 
Important information   Any concessional contributions in excess of the cap which are not released from super will also count towards your non-concessional contributions cap If you are 64 years old or under on 1 July, you may be able to bring forward the next two years’ worth of non-concessional contributions. This effectively allows you to contribute up to $540,0002 in one financial year.

Things you should know

This information is general advice only and does not constitute any recommendation or personal advice. It has been prepared without taking account of your objectives, financial situation or needs. It is current at the time of publication 15 January 2015, and is subject to change.

The taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. It has not been prepared by a registered tax agent. You should seek independent professional tax advice from a registered tax agent about any liabilities, obligations or claim entitlements that arise, or could arise, under a taxation law.

This information may contain material provided by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. Information that has been provided by third parties has not been independently verified and the Westpac Group is not in any way responsible for such information.

This document provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. The information provided is factual only and does not constitute financial product advice. Before acting on it, you should seek independent financial and tax advice about its appropriateness to your objectives, financial situation and needs. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. BTFM’s financial services guide can be obtained by contacting your adviser, calling 1300 657 010 or visiting bt.com.au. Superannuation is a long-term investment. The government has placed restrictions on when you can access your preserved benefits. The Government has set caps on the amount of money you can add to superannuation each year on a concessionally taxed basis. In addition, the government has set a non-concessional contributions cap. For more detail, speak with a financial adviser or visit the ATO website. This information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate as its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. While such material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses any such material. Expect where contrary to law, we intend by this notice to exclude liability for this material. All case studies are not real life examples and are for illustrative purposes only. BT14897F-0714lm

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