Concessional And Non-Concessional Super Contributions - What's The Difference, And What Are The Limits?

When you make payments into a self-managed superannuation fund (SMSF) they are classified as either concessional contributions or non-concessional contributions. The limits for both vary considerably, and the taxes that apply are significant when you go over the limits so it is important that you understand what they are about.

Concessional Contributions

Concessional contributions are payments made to your super that have not been taxed. If you are self-employed, you will claim these contributions as a tax deduction. If you are employed, it is the contributions made by your employer before your tax that are deducted. It also includes the compulsory employer contribution and your salary sacrifice.

A tax is applicable on concessional contributions. The rate of that tax is 15 percent and it is paid by your super fund.

But what about the limit - how much can you pay in before you start hitting penalties? The limits - and the ages that they apply to - changed in 2014. Here are the current limits:

  • If you are aged 48 or younger - $30,000 per financial year
  • If you are aged 49 or over - $35,000 per financial year

If you go over these limits, you are liable to pay tax at a rate of 31.5 percent. This is additional to the 15 percent already paid by the fund, so to make your money go further you should try to stay under the limit. If you are in this situation, you can make the payment personally, or you can release money from your superannuation account.

Non-Concessional Contributions

Non-concessional contributions are payments that you make to your super fund that have already been taxed. An example would be the profit you make when you sell a property. If you put the profit into your super after you have paid capital gains tax, the payment is regarded as a non-concessional contribution.

The annual limit on non-concessional contributions is $180,000. If you stay under this amount there is no further tax to be paid by you or the super fund - this is because you have already paid the tax.

If you go over the limit, however, you will have to pay tax at a rate of 46.5 percent.

Other Things To Be Aware Of

When you are thinking about concessional and non-concessional contributions there are other things that you should be aware of:

  • You can bring forward up to two years of your non-concessional limits to increase it to $540,000 if you are planning to make a large contribution to your super. Note that your total contributions for the three years still can't exceed $540,000 (3 x $180,000). This only applies if you are under 65.
  • Once you go over the concessional contribution limit, the amount over starts to count towards the non-concessional limit
  • Going over both limits can be very expensive

Understanding the differences between the two types of contributions, and staying within the caps as much as possible, is the best way to avoid the penalty taxes.




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