By SARAH BLAKE
MANAGER, BUSINESS ADVISORY
Sarah.Blake@williambuck.com

changing lives

There are two types of contributions a member is able to make to their fund;

  • Concessional contributions, which include employer contributions and personal contributions for which a deduction would be claimed in the member’s income tax return.
  • Non-concessional contributions, which are after tax contributions that may be made from personal savings, investments, inheritance or on behalf of a spouse.

Maximum contribution caps limit the amount of both concessional and non-concession contributions that can be made in any one year. The following table specifies the current caps in place.

 

Concessional Contributions
Contribution Type Age at 30 June Annual Limit (Cap)
Until 30 June 2017 Under 50 $30,000
50 and over $35,000
From 1 July 2017 All ages $25,000
Non-Concessional Contributions
Contribution Type Age at 30 June Annual Limit (Cap)
From 1 July 2015 to 7:29pm 3 May 2016 Under 65 $180,000 (or $540,000 “bring forward cap” over three financial years)
65 and over $180,000
From 7:30pm 3 May 2016 All ages $500,000 lifetime limit starting from 1 July 2007

 

Excess contribution tax will be payable on any contributions over the caps for the 2016 financial year. Members should also be mindful that amounts exceeding their concessional contribution cap, will also be counted towards the non-concessional cap.

From 7:30pm on 3 May 2016 a lifetime non-concessional contributions limit of $500,000 was introduced in the Federal Budget. The limit will take into account all non-concessional contributions made from 1 July 2007.

Where a member has exceeded the $500,000 non-concessional cap prior to 3 May 2016 no penalties will apply, however they will be deemed to have utilized their full cap and any additional non-concessional contributions from this date would be subject to penalty tax. Accordingly, extreme care should be taken in respect of any future non-concessional contributions.

Currently a superannuation fund is able to accept contributions in respect of a member in accordance with the following requirements.

Under the age of 65
Contributions can be made for any person under the age of 65

Between the age of 65 and 75
The member must be gainfully employed for at least 40 hours in a period of not more than 30 consecutive days in the financial year

Over the age of 75

Only mandated employer contributions made under an industrial award or super guarantee legislation can be accepted

Other changes that will take effect from 1 July 2017 following the Budget announcement are as follows;

  • The threshold for the additional 15% Division 293 tax on concessional contributions for ‘high income earners’ will be reduced to $250,000 from $300,000.
  • All individuals regardless of their employment circumstances will be able to claim a tax deduction for personal concessional contributions. Currently an individual must have less than 10% their total income from employment sources in order to claim a deduction for personal contributions.
  • Individuals with superannuation balances of less than $500,000 will be permitted to make additional concessional contributions, if they have not exhausted their concessional contribution limit in prior income years. The unused amounts will be carried forward on a rolling basis for a period of five consecutive years. Only unused amounts accrued from 1 July 2017 can be carried forward.
  • Currently individuals aged 65 to 74 must meet a work test, of at least 40 hours of paid work in a 30 day period, in order to make contributions to their fund. From 1 July 2017, the work test will no longer be required to be satisfied prior to making contributions.