Superannuation Contributions

Do you understand the types of superannuation contributions?  If not, read on for a brief introduction to the types and constraints each has.

Concessional contributions are pre-tax payments to your superannuation fund.

Your employer makes Superannuation Guarantee Contributions (SGC) which are concessional contributions.  If you have a salary sacrifice arrangement with your employer, they are also concessional contributions.  Any contributions you make and can claim as an income tax deduction are also concessional contributions.

Whatever form they take they are pre-tax contributions and form part of your taxable component of your superannuation.  Concessional contributions attract tax of 15% when they enter the nominated superannuation fund.  This is less than the lowest marginal tax rate.

SGC are government mandated superannuation contributions.  Currently your employer pays 10.5% of your gross wages into your nominated superannuation fund.  This rate changes so it’s important to check what the cap is each financial year.

There is a cap to how much pre-tax money you can put into your superannuation each financial year.  For the 2022/23 year the cap is $27,500, which indexes on an irregular basis.  It pays to keep up to date with the current limit.

Non-concessional contributions include:

• voluntary contributions made by you or your employer from your post-tax income,
• contributions you make from your personal savings,
• contributions your spouse makes to your superannuation fund,
• personal contributions which you have not claimed, or been allowed to claim, an income tax deduction.

Upon entry into your nominated fund, these superannuation contributions are not taxed. They form the tax-free component of your superannuation.

NCC also have an annual cap which for the 2022/23 FY is $110,000.

You have an option to trigger what is called the bring-forward rule which allows you to make up to 3 years’ worth of NCC in a single financial year, or over that three year period.

If your total super balance (the combined total of all your funds) is greater then the general transfer balance cap you are not able to make any non-concessional contributions.  They general transfer balance cap is currently $1.7 million.

You can check your superannuation contributions using your MyGov account.  Look under the ATO services.

Both concessional contributions and non-concessional contributions have penalties for exceeding the relevant cap.  In some cases a remedy may be applied to prevent the penalty from being given.  However that is beyond the scope of this article.  Please contact me if you have any concerns about this.

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