There are two ways in which you can contribute to your superannuation fund – via concessional or non-concessional contributions.
Concessional contributions are included in the assessable income of your fund and include employer contributions (i.e. 9% super guarantee and salary sacrificed amounts) and amounts for which you are eligible to claim a tax deduction for. Concessional contributions are also known as before-tax contributions.
Non-concessional contributions are not included in your fund’s assessable income (i.e. contributions tax does not apply to them) and include contributions made from after-tax income. Non-concessional contributions are often referred to as after-tax contributions.
Concessional and non-concessional contributions are subject to annual caps that apply each financial year.
| Concessional cap P/A | Non-concessional cap P/A | |
| 2011/12 financial year | $25,000 if aged under 50
$50,000 if aged 50 or over |
$150,000 (or can use two year bring-forward rules to contribute $450,000) |
| 2012/13 financial year (proposed but under discussion) | $25,000 (unless strict criteria is met) | $150,000 (or can use two year bring-forward rules to contribute $450,000) |
For the concessional cap in the 2012/13 financial year, the Government has proposed changes. From 1 July 2012, the concessional cap will be reduced to $25,000 regardless of age, however, for those with less than $500,000 of superannuation savings, concessional contributions of $50,000 pa will be permitted for those aged 50 or more.
Not surprisingly, the Government has come under much pressure from the proposed reduction and as such, the concessional contribution cap is a key discussion point for the Government’s superannuation roundtable discussion which commenced earlier this year.
The discussion, which will cover a range of superannuation issues, is expected to continue until late this year. It’s therefore highly unlikely there will be any change made to the current proposal before 1 July this year. There have been calls to set the concessional contribution cap at $35,000 pa regardless of age and other factors by various industry bodies, but even if this is accepted by the Government it’s likely to be a year or more until it becomes law.
Next week we’ll discuss the implications of exceeding the superannuation contribution caps and talk about the proposed reforms to reduce the severity of penalties.
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