What you can contribute to superannuation on an annual basis is limited by government caps based on your age and whether you are gainfully employed. Contributions are either concessional (taxed) or non-concessional (non-taxed).
If you exceed your contribution cap there will be excess tax of up to 93% on the amount contributed. This is not an effective way of using superannuation for your retirement.
Understanding what and when you can make a superannuation contribution is very important if you wish to avoid the excess contribution tax as there is little leniency from the ATO if you exceed your contribution cap. If you intend on making a significant contribution which will exceed $25,000 you should ensure that you might not inadvertently exceed your cap.
A concessional contribution is a contribution for which a deduction has been claimed and the super fund will pay 15% income tax on the amount of the contribution. A concessional contribution can be made if you are an eligible employee or you are self employed.
A non-concessional contribution is a contribution for which no deduction has been claimed and the super fund will pay no tax on the contribution.Whether you are eligible to make a superannuation contribution will depend on your age and whether you are gainfully employed.
Your super contributions can be made to your SMSF or to any other super fund which you are a member of.
Anyone age between 18 and 65 will be eligible to make superannuation contribution or have a contribution made for them if they are gainfully employed.
If you are aged between 65 and 74 you need to be gainfully employed for at least 40 hours in any thirty day period to make a contribution.If you are over 75 no contributions can be made.
The contribution caps for 2011 are;
| Age |
Concessional |
Non-Concessional |
| 18-49 |
$25,000 |
$150,000 |
| 50-65 |
$50,000 |
$150,000 |
| 65-74 |
$50,000 |
$150,000 |
| Over 75 |
Nil |
Nil |
You can bring forward three years of non-concessional contributions in a single year so that you have a non-concessional contribution of $450,000 however you must be under 65 at the time making the $450,000 contribution and that you will not be able to make non-concessional contributions for the next two years.
A contribution is any amount that increases the capital of a superannuation fund and is provided by a person whose purpose is to benefit one or more particular members of the fund.
It excludes any amount of money received by the Fund that is derived as money of profit or gain from investments owned by the Fund.
At Powers we work with you to ensure that you will not exceed your contribution cap as part of any strategy to maximise your contributions to Super.
We understand that you cannot afford to pay the excess contribution tax and we will do everything to make sure that you do not have to.