Super contributions - too much super can mean extra tax
Caps apply to contributions made to your super fund. Any super contributed over the cap amount is subject to extra tax. The cap amount and how much extra tax you pay once you exceed it depends whether the contributions are:
- concessional, or
- non-concessional.
Your age may affect whether you can make contributions to your fund and the conditions that apply.
What is the current concessional contributions cap?
For the 2007–08 financial year, the concessional contributions cap was $50,000 per person. Beyond the 2007–08 financial year the $50,000 cap will be indexed to average weekly ordinary time earnings (AWOTE) and rounded down to the nearest multiple of $5,000.
Contributions over the cap amount are subject to extra tax. This extra tax is called the excess concessional contributions tax.
All concessional contributions to all of your super funds in a financial year are counted toward the concessional contributions cap. If you have a defined benefit super interest, notional contributions are also counted towards the cap.
Caps for people over 50 years of age
If you’re 50 years of age or over, your concessional contributions cap is $100,000 per year until 30 June 2012.
If you turn 50 years of age during a year in this transitional period you will become eligible for the $100,000 cap in the same financial year. The $100,000 transitional concessional contributions cap is not indexed.
Concessional contributions
Generally, a concessional contribution is a contribution that is made by or for you to a complying super fund that is assessable income of the fund.
Assessable income is income that is subject to tax.
Concessional contributions are sometimes known as ‘before-tax’ contributions. These contributions include:
- employer contributions, including those made under a salary sacrifice arrangement
- personal contributions by an eligible person (such as a self-employed person) that are claimed as an income tax deduction
- allocated surplus amounts (as defined by the regulations to the legislation)
- notional contributions for defined benefit interest
- other amounts that are included in the assessable income of your super fund, for example
- the shortfall component of super guarantee charge paid to a fund by the ATO, and
- transfers from the superannuation holding accounts (SHA) special account that are not super co-contributions, and
- the taxable component of a directed termination payment (or the total of directed termination payments plus any transitional eligible termination payments) in excess of $1 million.
The following contributions are treated as concessional contributions:
- a contribution that is not assessable to the fund because the fund transfers the liability to pay tax on it to a
- life insurance company, or
- pooled superannuation trust, and
- a contribution that is not assessable to the fund because of the existence of a fund's pre-1 July 1988 funding credits.
Concessional contributions do not include:
- transfers from a complying fund to the extent that the amount transferred includes an untaxed element that is included in the fund’s assessable income
- personal contributions not claimed as an income tax deduction
- an amount transferred from a foreign super fund
- the tax-free component of a directed termination payment
- the taxable component of a directed termination payment that is less than $1 million, and
- contributions made to a constitutionally protected fund.
Tax payable
Excess concessional contributions tax is payable on excess concessional contributions at a rate of 31.5%. This is on top of the 15% paid by the fund on its taxable income (a fund’s taxable income includes most concessional contributions).
You are liable to pay the excess contributions tax, not your super fund.
Your excess concessional contributions also count towards your non-concessional contributions cap. If your contributions exceed both the concessional and non-concessional contributions caps in an income year you could end up paying 93% tax on the excess amount.
For more information or if you are unsure about superannualtion contributions. Please contact this office.