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There is a limit to the amount of money you can voluntarily contribute into your super fund on a concessional basis. This is achieved by setting the superannuation contribution limits which operate to limit the tax benefits available each year.
Making contributions over the limits results in additional tax payable, and excess concessional contributions are counted towards the non-concessional cap. However, from 1 July 2013 excess concessional contributions can be withdrawn, and taxed at the individual’s marginal rate plus interest. Legislation was passed in March 2015 to treat excess non-concessional contributions on a similar basis.
Concessional contributions are essentially those contributions which are tax deductible, and include employer contributions and personal contributions claimed by the self-employed. From 1 July 2014 the concessional cap is $35,000 for anyone aged 49 years or more on 30 June 2014 and for anyone aged under 49 years on 30 June 2014 the cap is $30,000.
Non-concessional contributions are those made from after-tax income, and there is no contributions tax applied when they are contributed to the super fund. Once in the fund, the normal fund tax rates apply to earnings
From 1 July 2014 there is a limit of $180,000 per year on non-concessional contributions which are post-tax amounts that have not been claimed as a tax deduction. This cap amount may be indexed annually. If your superannuation contributions exceed the cap amount you will be taxed at the highest marginal rate plus Medicare on those excess contributions. There are transitional rules that apply to taxpayers who are nearing retirement.
Amounts paid into superannuation by your employer to meet the Superannuation Guarantee obligations and amounts paid under a salary sacrifice arrangement are called concessional contributions. From 1 July 2007 total annual concessional contributions have been capped to an upper limit. If annual contributions exceed the applicable cap amount, the excess will be taxed at the highest marginal rate, plus Medicare. The cap will be indexed annually based on movements in full-time adult average weekly ordinary time earnings (AWOTE) published by the Australian Statistician for the December quarter, rounded down to the nearest multiple of $5,000.
There is currently a temporary higher cap of $35,000 for the 2014-15 financial year for individuals aged 60 years and over, and $35,000 for the 2014-15 financial year and later financial years for individuals aged 50 years and over. The higher cap will cease when the general concessional cap reaches $35,000 by way of indexation. Currently, for the 2014-15 financial year, the cap for all individuals is $30,000 (including those aged from 50 to 74 years of age who have had a higher limit in past years).
Since 1 July 2009 all contributions made to a superannuation fund under a salary sacrifice arrangement have been included in the reportable employer superannuation contributions amount shown on your PAYG payment summary. Also included are any superannuation contributions for which a tax deduction has been claimed. This means that any entitlement you have to any benefits from Centrelink or the Family Assistance Office, that are subject to an income test, will take into account those amounts. It also contributes to the calculation of any Child Support payments and is used to determine your liability to such things as the Medicare levy surcharge or repayments of HECS-HELP debts. They may also impact on any tax offsets that you are entitled to claim on your tax return.
People who have reached 60 no longer pay tax on superannuation income streams (pensions or annuities) that are paid from a taxed fund. A taxed fund is one where contributions tax was paid on the contributions made by your employer into your super fund on your behalf. Contributions tax would also have been paid for contributions made under a salary sacrifice arrangement. Most funds are taxed funds. However, for taxpayers who belonged to an untaxed super fund, they will still have to pay tax on their superannuation income stream, irrespective of their age.
Taxpayers who are over 60 years of age (for the full financial year) and receiving a superannuation income stream from a taxed fund no longer receive a PAYG Payment summary.
Employee taxpayers whose employer is required to contribute to superannuation are not eligible to claim a tax deduction. Instead the government may make a co-contribution to their fund. Please see our section on Superannuation Co-Contributions for more details.
Contributions made through salary sacrifice or by another person on your behalf will not be counted for the purposes of calculating the co-contribution. If you are self-employed you may be able to claim a deduction for your contributions.
If you do not tell your superannuation fund what your TFN is then the fund will be required to pay additional tax on any contributions made by your employer (including salary sacrifice amounts). Without having your TFN recorded, your fund will not be able to accept any personal contributions that you make and the government co-contribution that you may be entitled to cannot be paid into your account.
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