Last updated on 17th Jul 2023

Superannuation is a tax-effective way to save for retirement. However, the amount of contributions you can make to super each year is limited. Any superannuation contributions made in excess of the concessional and non-concessional caps may have a penalty tax applied. Furthermore, there’s the administrative burden of dealing with the excess contributions. So take care with how much you contribute each year.

What is the Concessional Contributions Cap?

Concessional contributions generally include contributions your employer makes for you and contributions you make yourself for which you claim a personal tax deduction. The concessional cap for the 2023/24 financial year is $27,500. You may be able to utilise unused portions of previous years’ concessional contributions caps (starting in 2018/19) if your total superannuation balance was less than $500,000 on June 30, 2023.

What is the Non-Concessional Contributions Cap?

Non-concessional contributions (NCCs) generally include your own contributions into super for which you don’t claim a personal tax deduction, as well as contributions made by your spouse. If not managed carefully, excess concessional contributions can also count towards this cap. The general NCCs cap for the 2023/24 financial year is $110,000. Additionally, NCCs can only be made if the balance of your superannuation savings was less than $1.9 million on June 30, 2023.

Some after-tax contributions you make will not count towards the NCCs cap. This includes contributions from personal injury payments and up to $1.705 million (2023/24) contributed under the small business CGT cap. Both of these opportunities can help you increase how much you can get into super.

Bring Forward Two Years of Non-Concessional Contributions

If you want to boost your super and were under age 75 on July 1, 2023, you may be able to ‘bring forward’ the next two years of NCCs and add this to the general cap for the current year to contribute a higher amount. However, remember that doing this caps how much you can contribute across the full three-year period. How much you can bring forward will also depend on how much you already have in super.

Be aware that NCCs must be received by your super fund no later than 28 days following the end of the month in which you turn age 75. Your super fund cannot accept NCCs after this date.

Example

Harold is age 70 and has inherited money from his mother’s estate. He has existing super savings of $400,000. Harold decides to contribute $330,000 to super as an NCC on October 1, 2023. This is done by bringing forward the NCC caps for 2024/25 and 2025/26 into the current year. Consequently, Harold will not be able to contribute further NCCs before July 1, 2026.

The ‘bring forward’ option is triggered as soon as you make NCCs more than the general cap ($110,000 for 2023/24).

Tax on Excess Contributions

If you exceed either of the contribution caps, tax penalties may apply, and you may need to withdraw some amounts. How this works will depend on which cap is breached.

Excess Concessional Contributions

If you exceed your concessional contributions cap, your tax return for that year is amended, and the excess contributions are taxed at your marginal tax rate, less 15% for the tax already deducted in the fund. You are personally liable to pay this tax amount, but you can elect to withdraw up to 85% of the excess contributions from your superannuation account. If the excess is not withdrawn, this amount also counts towards your NCC cap.

Excess Non-Concessional Contributions

The tax rate on excess NCCs is 47% (including Medicare levy). You can avoid this tax by withdrawing the excess NCCs plus associated earnings (as calculated by the ATO). The earnings will be taxed at your marginal tax rate, less 15% for the tax already deducted in the fund.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.