Contributions to an SMSF can either be concessional or non-concessional:
- Concessional contributions (before-tax contributions, taxed at the concessional rate of 15%); and
- Non-concessional contributions (after-tax funds added to the SMSF, the SMSF will not get taxed on this again).
The cap for a Member’s concessional contribution depends on their age as set out in the following table:
|Income Year||Age and applicable cap amount|
|2017-2018||All ages: $25,000|
|2016-2017||< 49 : $30,000||49 + : $35,000|
|2015-2016||< 49 : $30,000||49 + : $35,000|
|2014-2015||< 49 : $30,000||49 + : $35,000|
|2013-2014||< 59 : $25,000||59 + : $35,000|
Concessional contributions made to an SMSF include:
Employers are required to make a Superannuation Guarantee Contribution (SGC) of 9.5% of an employee’s gross salary and wages. Trustees have the choice of asking their employer to contribute directly into their SMSF . Trustees can fill out a superannuation standard choice form notifying their employers of their election to contribute directly into their SMSF. Generally, if you ask your HR department, they will usually transfer the contributions into the Fund you elect.
Salary sacrifice is an arrangement between an employer and an employee whereby the employee agrees to put more than 9.5% of their gross salary into their super fund. Doing so could result in tax saving if the Trustee’s marginal tax rate is higher than 15%. However, Trustees need to be mindful that after 1 July 2017, the concessional contribution cap has been decreased to $25,000. For more information, please see here.
After 1 July 2017, the requirement that a Trustee needs to derive less than 10% of their total income from a single employment source in order to claim a deduction for self-employed contributions has been abolished. Most people will be able to claim a full deduction for contributions they make to their super until they turn 75. After the age of 75, you can only claim deduction on the Superannuation Guarantee Contribution (SGC) of 9.5%. For more information, please see here.
Low Income Superannuation Tax Offset
From 1 July 2017, the Government introduced the Low Income Superannuation Tax Offset (LISTO) which replaced the Low Income Superannuation Contribution (LISC) policy. The purpose of LISTO is to offset the tax payable on concessional contributions made by low income earners. For more information on LISTO, please see here.
Excess concessional contributions
From 1 July 2013, if a Member exceeds their concessional cap, the amount over the cap will be included in their assessable income and taxed at their marginal tax rate plus an excess concessional contributions (ECC) charge. The ECC charge is applied to concessional contributions in excess of the cap to recognise that the tax is collected later than normal income tax. The Tax Office will apply a 15% tax offset to account for the contributions tax that has already been paid by the super fund. This will be issued to the member on an income tax Notice of Assessment or income tax Notice of Amended Assessment.
From 1 July 2018 if your total super balance is less than $500,000 you are able to add unused amount of your concessional contributions cap to the following years limit. To read more on the Carry forward rule regarding concessional contributions, please click here.
The non-concessional contributions cap from 1 July 2017 have decreased to $100,000. Members aged 64 or younger can still bring forward their non-concessional contributions over three years.
More info here:Super Contributions Cap