Concessional contributions are contributions when a tax deduction is claimed, including the following contribution types:
- Employer Contributions (Currently 9.5%)
- Salary Sacrifice Arrangement
- Transfers from reserves
- Self-employed Super contributions
The tax rate on concessional contributions below the cap is generally 15% (the current cap is $30,000 for people under 50 and $35000 for those who are 50 or above). In the 2016-2017 Federal Budget it was announced that from 1st July 2017 the concessional super contributions cap will be lowered to $25,000 for all individuals.
- High-income earners
For those who earn more than $300,000 a year, the tax rate on concessional contributions is 30%. The ‘Income’ in this context is the sum of the taxable income, concessional contributions, adjusted fringe benefits and total net investment losses. This is referred to as the Div 293 tax and the threshold will be lowered to $250,000 from 1 July 2017.
- Low-income earners
People who earn less than $37,000 a year do not incur contribution taxes on their concessional contributions. Specifically, the contribution taxes will be returned to their account, with a maximum amount up to $513 (9.25%x$37,000×15%).
Excess concessional contributions
When contributions in excess of the concessional contributions cap (general cap of $30,000 per annum) is made to an SMSF, an additional tax is applied to the Fund.
The excess concessional contribution may be refunded and be assessed at your marginal tax rate, rather than to pay excess contributions tax. You are only eligible for this offer if:
- This is the first time you exceed your concessional contributions cap in either 2011-2012 or 2012-2013 financial year.
- The excess amount is equal or less than $10,000.
- The most recent lodged tax return for the relevant income year is within 12 months of the end of that year (or within a longer period if the Commissioner allows it).
If the excess amount is greater than $10, 000 then you will be subjected to excess contribution tax.
This is a one-off offer from the Tax Office. Once you have made your decision, it cannot be changed and you will not receive further offers in later years.
Once you have accepted the offer:
- The excess concessional contribution will be added to your assessable income and taxed at your marginal tax rate.
- A tax-offset of 15% for the excess concessional contribution will be issued as this is to recognize the 15% tax already paid by your super fund.
- These two will off-set each other to give the taxable amount you need to pay.
- The Tax Office will send you a refund of 85% of the total excess concessional contributions.
- After including all the debts from the Tax Office, the remaining credit will be refunded to your nominated financial institution.
If the concessional contribution exceeds the cap, the amount now will be included in your assessable income and taxed at marginal tax rate, rather than the excess concessional contribution tax rate of 31.5%.
The excess concessional contribution (ECC) will be applied on the increase of your tax’s liability, and it will be collected later than the normal income tax.
A tax off-set of 15% will be refunded to you to reduce your tax liability as it has already been paid by the SMSF.
You may elect up to 85% of your excess concessional contribution from your SMSF to pay your income tax assessment by filling in the election form. After offsetting amount against any debts may be owed by you to the Tax Office, the remaining credit will be refunded back to your nominated financial institution.
Super guarantee percentage
The Super guarantee percentage will gradually increase to 12% as follows:
|Period||Super guarantee (%)|
|1 July 2002 – 30 June 2013||9|
|1 July 2013 – 30 June 2014||9.25|
|1 July 2014 – 30 June 2021||9.5|
|1 July 2021 – 30 June 2022||10|
|1 July 2022 – 30 June 2023||10.5|
|1 July 2023 – 30 June 2024||11|
|1 July 2024 – 30 June 2025||11.5|
|1 July 2025 – 30 June 2026 and onwards||12|
Timing of contributions
Generally, a contribution is recognized and recorded in the year when cash is received by the SMSF. Taxation Ruling 2010/1 provides direction with respect to timing of contributions.
For more information on taxation in Super, please see our website page here.