The Commonwealth Government has set caps on the amount of contributions you can make to super without having to pay extra tax.
There are two caps – the concessional contributions cap and the non-concessional contributions cap.
What are concessional and non-concessional contributions?
Concessional contributions are generally those your employer makes or you make and claim as an income tax deduction. These may also be called before-tax contributions because tax isn’t levied on them before they enter a super fund. Concessional contributions are taxed at the rate of 15% when they enter super, and this tax is remitted by your super fund.
Non-concessional contributions are those you make from your own money. These may also be known as after-tax, undeducted, or personal contributions. Because income tax has been paid on non-concessional contributions before they enter super, they are not subject to the 15% contributions tax like concessional contributions.
It‘s important to note, these caps apply across all of your super accounts, not just QSuper.
| Contribution type |
Concessional |
Non-concessional |
| Description |
Contributions from before-tax income, or for which a tax deduction has been claimed |
Contributions from after-tax income |
| Includes |
- Employer contributions
- Salary sacrifice (standard and voluntary) contributions
- Contributions for which a tax deduction has been claimed |
- Standard (after-tax) contributions
- Voluntary contributions
- Spouse contributions |
What is a contribution cap?
The concessional contributions cap is $50,000 and is indexed each financial year with Average Weekly Ordinary Time Earnings (AWOTE1) in increments of $5,000. The cap didn’t increase for the 2008/2009 financial year as indexation was less than $5,000. Indexation of the concessional contributions cap for the 2009/2010 financial year will take into account AWOTE growth for both the 2007/2008 and 2008/2009 years.
There are transitional arrangements in place. This means, for the period 1 July 2007 to 30 June 2012 concessional contributions up to $100,000 per person each financial year can be made if you are at least 50 years old, or from when you turn 50 during this period. It’s important to note that unlike the concessional contributions cap, the transitional cap isn’t indexed with AWOTE.
The non-concessional contributions cap is always three times the concessional contributions cap. If you are under 65 at any time during the financial year the contribution is made, you can bring forward two years of contributions, effectively allowing you to contribute $450,000 at once. This is called the bring forward rule and it is automatically triggered when your contributions exceed $150,000 in a financial year. Once you trigger the bring forward rule you can make total contributions of up to $450,000 over three years, starting from the year the bring forward rule was triggered. If you choose to use the bring forward rule, the amount you bring forward isn’t indexed.
Remember though, you’ll have to meet the work test if you make contributions once you’ve reached 65.
There are some exclusions from the contributions caps, and you can find information about these in the Personal contributions guide (pdf). There is information about indexation of the caps in this guide as well.
The contributions caps
| Contribution type |
Concessional |
Non-concessional |
| Limit |
$50,000 per year2 |
$150,000 per year |
| Tax on amounts over the cap |
31.5% (on top of the 15% contributions tax) |
46.5% |
| Exceptions |
For the period from 1 July 2007 to 30 June 2012, concessional contributions up to $100,000 per year can be made if you are at least 50 years old, or from when you turn 50 during the period. This is called the transitional concessional contributions cap.
Concessional contributions in excess of the cap will be assessed for excess tax and will count towards the non-concessional contributions cap. |
If you are under 65 at any time during the financial year the contribution is made, you can bring forward two years of contributions, effectively allowing you to contribute three times the cap at once.
Non-concessional contributions in excess of three times the cap will be assessed for excess tax. |
Does QSuper monitor my contributions?
It’s important to note QSuper does not monitor your contributions to ensure you don’t exceed the caps. You should keep a record of the ongoing total of your contributions each financial year to ensure you don’t exceed the caps, as QSuper can’t return your contributions once received. And remember, the caps apply across all of your super funds, not just QSuper.
Contributions in excess of the caps
Concessional contributions in excess of the cap are assessed for additional tax at 31.5% (see the table above), which is imposed on the member, and count towards your non-concessional contributions cap. A notice of assessment and a Release authority is sent to the member by the Australian Taxation Office (ATO). The Release authority enables the member to withdraw an amount from super equal to the tax liability. Alternatively the tax can be paid from other money.
Non-concessional contributions in excess of the cap are assessed for additional tax at 46.5% (see the table above), which is imposed on the member, with the ATO sending the member a notice of assessment and a Release authority. The member must then provide the Release authority to a super fund to withdraw an amount equal to the tax liability and forward this amount to the ATO. Money from other sources can not be used to pay for excess tax on non-concessional contributions.
Notional taxed contributions for defined benefit accounts (concessional contributions)
Special rules apply to working out the concessional contributions for members of a defined benefit account. Contributions in defined benefit accounts aren’t allocated to individual members, but to a pool of funds from which benefits are paid. A formula is used to work out what’s called the notional taxed contribution (NTC), which is counted towards the concessional contributions cap.
The formula takes into account the member’s superannuable salary, non-concessional standard contributions, and an actuarially derived new entrant contribution rate (NECR).
1.2 x ((NECR x 1 July salary) - non-concessional standard contribution)
You can work out your NTC by using the formula and the NECR rate for your account type below. If you’re a Defined Benefit account member, the formula is the same no matter what your rate of contribution.
| Account type |
Conditions |
Superannuable salary |
NECR |
| Defined Benefit account |
|
1 July salary |
12% |
| Defined Benefit account – Police |
|
1 July salary |
14% |
| State account |
Males and females who commenced post 26 Feb 1984 |
Preceding 1 October salary |
9% |
| Females who commenced pre 27 Feb 1984 |
10% |
| Police account |
|
Preceding 1 October salary |
11% |
Example
Cooper is 51 and a member of the Defined Benefit account. He works full-time and his 1 July salary is $125,000. He contributes $6,250 to his account, which is 5% of his after-tax salary.
Cooper’s NTC amount at the end of the financial year is calculated below.
1.2 x ((12% x $125,000) - $6,250) = $10,500
As you can see, Cooper’s NTC amount is $10,500 and as he is over 50, the $100,000 transitional concessional contributions cap applies. This means Cooper can make salary sacrifice voluntary contributions into an Accumulation account of up to $89,500 without exceeding the cap.
What if I work less than the full year or part-time while in a defined benefit account?
If you contribute to a defined benefit account for only part of the year, you need to multiply your salary by the number of days you contributed to the defined benefit account divided by the total days in the year.
If you work part-time, you’ll need to multiply your salary by your part-time ratio. You can find out your part-time ratio by contacting your employer. If you change the number of hours you work during the financial year, your employer may not be able to tell you your part-time ratio until the end of the financial year.
Example
Tenille is 42, works 3 days a week (60% of the full-time rate) and her full-time equivalent salary is $54,000. She salary sacrifices her standard member contributions to her Defined Benefit account each fortnight.
Tenille’s NTC amount at the end of the financial year is calculated below.
1.2 x ((12% x $54,000) x 60%) = $4,665.60
Tenille’s NTC amount is $4,665.60, which includes her salary sacrifice standard member contributions. The NTC amount is below the $50,000 concessional contributions cap which applies to Tenille as she is under 50.
Special rules apply if you were a member of a defined benefit account before 6 September 2006
If you were a defined benefit account member before 6 September 2006 and you have maintained your account since, special rules apply. The special rules mean if your NTC amount exceeds the cap, you won’t pay any excess contributions tax, as your NTC amount is deemed to be within the cap.
Remember, these special rules only apply to the NTC amount attributed to your defined benefit account, and not to concessional contributions to an accumulation account, such as salary sacrifice voluntary contributions, or additional employer contributions paid to meet ordinary time earnings obligations.