Super contributions – Concessional & Non-Concessional

Most people are aware there are two main types of superannuation contributions:
1. Non-concessional contributions, and
2. Concessional contributions

Non-concessional are personal contributions we make to super, for example; contributions we make for our spouse and for our children under 18 years of age.

These are contributions we do not intend to claim tax deductions for and are usually made from our after-tax income, from savings or from the proceeds from the sale of something such as an investment property.

There are a number of important rules around making non-concessional contributions, including:

• The usual rules around age limits. That is, contributions may be made by someone under the age of 65. However, if aged between 65 and 75, a work test must be met in the year the contribution is being made. Non-concessional contributions can’t be made by people aged 75 or over.
•  Non-concessional contributions are subject to an annual limit of $100,000 per year. However, where a person has a ‘total superannuation balance’ that exceeds $1.6m, they are no longer able to make non-concessional contributions. The total superannuation balance is the total of all amounts a person had in super at the end of the previous financial year.
• A unique feature of non-concessional contributions is the ability to bring forward up to three years contributions, if under age 65. This means you may contribute up to $300,000 in one year, but then nothing in the next two financial years. The contributions that may be made under the three year bring forward rule are scaled back when your total superannuation balance exceeds $1.4m.

Concessional contributions are virtually any contributions that are not a non-concessional contribution. They include contributions made by an employer, tax-deductible personal contributions, and contributions made by third parties. Also, contributions made by a parent or grandparent for children aged 18 or older are treated as concessional contributions.

When concessional contributions are received by a super fund, they are treated as income of the fund and are taxable at a rate of 15%. This is often referred to as ‘contributions tax’.

Concessional contributions are subject to a maximum cap or annual limit of $25,000. This is a reduction in the limits that applied in 2016-17.
Exceeding either the concessional or non-concessional contribution cap can have tax implications, so this is best avoided.
If planning to make either non-concessional or concessional contributions before 30 June this year, consider seeking the assistance of a qualified financial planner.

Source: Peter Kelly | Centrepoint Alliance