Super contributions are one of the areas that individuals need to review each year according to their circumstances.
Tax deductible (Concessional) contributions
Concessional contributions are before-tax contributions made into a super fund. They include employer contributions, salary sacrifice payments and personal contributions that can be claimed as a tax deduction. In the 2020-21 financial year, the concessional contributions cap is $25,000 for all ages but will be increasing to $27,500 in the new year.
Suppose your total superannuation balance was less than $500,000 on 30th June 2020. In that case, you may be entitled to carry forward your unused contributions, contribute more than the general concessional contributions cap and make additional concessional contributions for any unused amounts.
This is particularly useful for people who have made capital gains or are approaching retirement.
Accounting firms and financial planners can help you determine just how much money you can contribute to super this year and still be entitled to a tax deduction.
Concessional contributions are taxed at 15%. Individuals may also pay Division 293 tax, which is an additional tax on concessional contributions for individuals whose combined income and contributions are greater than $250,000.
Non-concessional contributions are paid into super funds from after-tax income. They include contributions made by individuals or their spouse to a super fund where contributions are not claimed as an income tax deduction. The annual non-concessional contribution cap for the 2020-21 financial year is $100,000 and is increasing to $110,000 in the new year.
Eligible individuals may make bring-forward contributions, allowing them to bring the next two years of their annual nonconcessional contributions cap forward into the current financial year without breaching the contributions cap.
Non-concessional contributions are not taxed unless the caps are exceeded.