Concessional Vs. Non-Concessional Super Contributions

Last Updated 9 January 2014

In simple terms contributions you make into super are classified for tax purposes as either:

1. concessional or 2. non-concessional.

What are Concessional Contributions?

These are before tax employer contributions to super including compulsory employer contributions & salary sacrifice. If you are self-employed these are the contributions you claim as a tax deduction.

There is a limit on how much you can make in concessional contributions each financial year of $25,000. However under recent changes for the 2013/2014 financial year, there is an exception to this rule. If you are over the age of 59 as at June 30, 2013 the concessional cap is $35,000.

What happens if I go over the limit?

You have to pay additional tax of 31.5% of the contribution amount over the limit.

Source: ATO

Who pays the tax on concessional contributions - me or the super?

The super fund pays the tax on the contribution at 15%.

If you are over the limit you pay tax on the amount over at 31.5%.

What are non-concessional contributions?

These are after tax contributions i.e. money you put in your super that you have already paid the tax on. Example: you receive your PAYG salary. Your employer has already paid the tax on the salary before giving it to you. You then decide to pay it into your super fund.

What about the limit?

The limit is $150,000 which is six times the concessional contributions limit.

Also if you are under 65 you can ‘bring forward’ up to 3 years-worth of limits into one year.

Example:

You sell a property and pay capital gains tax that leaves you with an after-tax profit of $300,000.

You want to put this money into super. You have already paid tax on the money so it is a non-concessional contribution. The amount is over the one year limit of $150,000 so you decide to bring forward 2 years-worth of limits and so your limit for the next 2 years is $300,000.

Note though that any contributions made over the concessional contributions limit will count towards the non-concessional contributions limit!

Source: ATO

What if I go over the limit?

You have to pay tax at 46.5% of the amount over the limit.

Who pays the tax?

You have already paid the tax so the super fund does not pay any tax on the non-concessional contribution.

If you are over the non-concessional contributions limit you will pay tax at 46.5% of the amount over.

Source: ATO

What happens if I go over both limits?

Good question. You can end up paying 93% of the amount over both limits in tax!

Source: ATO

Example:

You salary sacrifice $20,000 and your employer pays a compulsory super contribution of $10,000. You sell a property and make a $450,000 non-concessional (after-tax) contribution.

Concessional Contributions

 

Salary Sacrifice

20,000

Employer Contributions

10,000

Total

30,000

   

Limit

25,000

Excess

5,000

   

Tax Payable On Excess (31.5% + 15%)

2,325

   

Non-Concessional Contributions

 

After-tax contribution from sale of property

450,000

Concessional excess

5,000

Total

455,000

   

Limit (Bring forward 3 years of limits)

450,000

Total Excess

5,000

   

Tax Payable on Excess (46.5%)

2,325

   

Total Tax Payable

4,650

% of Excess

93.0%

 

So you will pay 93% of the amount in excess of both in tax!

Looking for other super tax strategies? Click here for more...

 

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