Contribution Rules and Caps
Contribution age and employment status rules
There are some issues relating to your age and employment status which you should consider if you, your employer or your spouse want to make a contribution to your super. Generally, your super contributions must be made before you turn age 75 (or 28 days after the end of the month in which you turn age 75). If you are age 65 or over, the work test applies.
What is the work test? The work test requires that you work at least 40 hours in a period of no more than 30 consecutive days during the financial year.
If you are aged under 18: You may not be eligible for SG Contributions if you are under 18 years of age and you are not working full time.
If you are aged 18-64: You may not be eligible for SG Contributions if you earned less than $450 in a month
If you are aged 65-69: The work test applies for Other Employer Contributions, Personal Contributions and Spouse Contributions
If you are aged 70 to 74: You are not eligible for SG Contributions, Other Employer Contributions or Spouse Contributions. The work test applies for Personal Contributions.
If you are aged 75 and over: You are not eligible for SG Contributions, Salary Sacrifice, Other Employer Contributions, Personal Contributions and Spouse Contributions. You may still be eligible for Award Employer Contributions.
Contribution Caps
There are legislative contribution limits (“Contribution Caps”) which apply to concessional and non-concessional contributions.
If you contribute to more than one super fund, the contribution caps apply to the total contributions you make across multiple funds.
Concessional Contribution Cap
The annual employer, or concessional, contribution cap is $25,000 for 2009/10.
See Tax and Your Super for details of how concessional contributions are taxed.
Concessional Contribution Cap Transitional Arrangements
For people aged 50 or over, the Concessional Contribution Cap is $50,000 per financial year until 30 June 2012.
Non-concessional Contribution Cap
Currently, Personal Contributions from after tax income are limited to $150,000 per financial year (2009/10). As superannuation funds are unable to accept contributions exceeding this limit, any such contributions will be returned to the contributor. If you pay more than the allowable limit because you contribute to more than one fund, any excess contributions will be taxed at 46.5%.
The Non-concessional Contribution Cap applies to all Non-concessional Contributions made by or on behalf of an individual. For example, contributions made by one spouse for the benefit of the other spouse will be counted against the receiving spouse’s cap. The Government Co-contribution is not included in the cap.
See the Tax and Your Super for details of how Non-concessional Contributions are taxed.
Non-Concessional Contribution Bring Forward Option
People under age 65 are able to bring forward two years of contributions. For example, a person under age 65 who makes up to $450,000 of contributions in the 2009/10 financial year is then unable to make further Non-concessional Contributions until the 2012-13 financial year. Upon turning age 65, individuals are able to make $150,000 of Non-concessional Contributions each financial year, provided they satisfy the work test, being that they have been gainfully employed for at least 40 hours in any 30-day period during the financial year. Individuals aged 63 and 64 who contribute $450,000 are not required to meet the work test in the two years after they make the contributions. Contributions by individuals over age 75 are prohibited.
Tax deductions are available for employer or predominantly self-employed persons’ contributions, but where those contributions exceed the Concessional Cap, the employee will be liable to additional tax (refer to Tax and Your Super).
There are two ongoing exemptions to the Non-concessional Cap, being proceeds from the disposal of eligible small business assets up to a lifetime CGT Caplimit (2009/10) of $1.1 million (indexed), and the proceeds from a settlement for an injury resulting in permanent disablement.