The Australian Taxation Office (“ATO”) has released the superannuation contributions caps for the 2011/2012 year which we have set out below. In this article we explore the types of contributions that can be made to superannuation and the caps that set a limit on the amount of contributions an individual can make in any year. What contributions can I make to superannuation? Superannuation contributions can be divided into two types:
- concessional (before-tax); and
- non-concessional (after-tax).
“Concessional contributions” are contributions that receive special tax treatment. They include:
- compulsory Superannuation Guarantee contributions by an employer; and
- any salary sacrificed contributions deducted from an employee’s before-tax salary.
For individuals who:
- are self-employed;
- are not employed;
- receive 10% or less of their income from an employer;
these individuals can make concessional contributions and claim them as a tax deduction. “Non-concessional contributions” are contributions made to superannuation from after-tax income. These contributions are not taxable in the superannuation fund. What are the caps on my superannuation contribution? Both concessional contributions and non-concessional contributions are subject to a contributions cap which sets a limit on the amount of contributions that can be made by an individual in any one year. If the cap is exceeded the excess contributions are likely to be subject to penalty tax..
Please click here to view table.
What are the changes to the concessional contributions cap for over 50s? Although the legislation is not yet in place the Government’s consultation paper indicates the following:
- Until 30 June 2012, the concessional contributions cap for over 50s is $50,000, regardless of size of account balance.
- From 1 July 2012 if the account balance is less than $500,000 the concessional cap for over 50s will be at least $50,000 (subject to indexation) (draft legislation – not yet in place).
- From 1 July 2012 if account balance is over $500,000 the concessional cap will be $25,000 or whatever the indexed amount is at July 2012 (draft legislation - not yet in place).
The Government’s consultation paper indicates the $500,000 threshold will be based on an individual’s total superannuation account balance, regardless of whether that account balance was created by concessional or non-concessional contributions.
Age 65 to 74 - Work Test
An individual aged 65 or over planning on making superannuation contributions must satisfy a work test, that is they must be gainfully employed for at least 40 hours in a period of not more than 30 consecutive days in the financial year in which the contribution is made.
Age 75 or over
Once you turn 75 years old, you are generally unable to make any super contributions. However, your fund can accept employer contributions your employer is required to make under an industrial award or agreement.