Don’t go over the super caps

You can contribute extra to your super at any time to help increase your savings for the future.

However, there are limits on how much you can contribute before you pay extra tax.

The different limits (known as caps) depend on the type of contributions made into your super fund.

Concessional (before tax) contributions are contributions made into your super fund before any tax is paid on them. They can include compulsory super payments (SG) made by your employer; salary sacrifice contributions; costs your employer pays on your behalf, such as super administration fees and insurance premiums; and some personal contributions, such as super payments you make if you’re self-employed (if an income tax deduction is allowed). Once in your fund, these contributions are taxed at 15%.

Non-concessional (after-tax) contributions are generally contributions you make into your super fund after tax has been paid on them.

They include personal contributions you make from your after-tax pay that you are not allowed to claim as an income tax deduction, contributions your spouse makes to your fund on your behalf. From July 1, 2013, if you go over the concessional cap, your excess contributions will be included in your assessable income and taxed at your marginal tax rate (plus an interest charge).

To assist you in paying the additional tax bill, you may release up to 85% of the excess concessional contributions from your super fund. You can only release up to 85% because 15% contributions tax has already been paid by your super fund. Released contributions will no longer be counted as nonconcessional contributions.

You will receive a 15% tax offset for this in your tax return. If you go over the non-concessional cap, you will receive an excess non-concessional assessment. You can go over the non-concessional cap by up to two years’ worth of contributions without penalty if you are under age 65 in the relevant financial year. This is called the bring forward provision.

The cap amount that applies is three times the nonconcessional contributions cap for the financial year in which you make the contribution. The government has proposed that non-concessional contributions over $180,000 may be withdrawn, along with any associated earnings. The earnings would be taxed at your marginal tax rate. This proposal has not yet become law.

To avoid extra tax, check your contributions regularly to make sure you aren’t going to exceed the caps. When you work out how much you’re contributing in any financial year, remember that contributions count when they are received by your fund – not when the payment was sent. If you salary sacrifice to super and you think you’re at risk of exceeding the cap, consider reducing your salary sacrifice amounts.

This publication was issued by First Super Pty Ltd (ABN 42 053 498 472, AFSL 223988), as trustee of the First Super superannuation fund (ABN 56 286 625 181). The information is not investment advice and does not take your personal circumstances into consideration. You should consult the product disclosure statement (PDS) before making any decision. Content was accurate at the date of issue, but may subsequently change. You should contact First Super on 1300 360 988 for updated information and to obtain a copy of the PDS.