Yes. The non-concessional contribution cap is the maximum amount of money you can put into your super account from your own after-tax income. The cap can differ based on conditions like your Total Super Balance.
The differences between non-concessional and concessional contributions
Non-concessional contributions are contributions for which you have not claimed a tax deduction. Non-concessional contributions are made from your after-tax income and can be made by you personally, by your employer on your behalf or by your spouse).
On the other hand, concessional contributions are those made by your employer from your before-tax income as well as any personal contributions you are allowed to make as an income deduction.
The cap for non-concessional contributions is significantly higher than that for concessional contributions; currently, the annual limit is $110,000 compared to $27,500.
What are Concessional Catch-up Contributions?
You may be eligible to contribution more than $27,500 in one year if you satisfy the following conditions:
- You have space in your concessional contribution cap over a 5-year period from not fully utilising the cap in previous years, this can be checked via the MyGov website.
- You total super balance (TSB) is under $500,000 on the 30th June the previous year; andAt the time of making the contribution you are either under age 67 or under 75 and meet the work test.
What is the Non-concessional bring forward arrangement?
The bring-forward rule allows individuals under 75 years of age to make non-concessional contributions of up to 3 times the annual non-concessional contribution cap in a single year—effectively bringing forward 2 years of contributions. If your Total Super Balance (TSB) is less than $1,680,000 you can contribute up to $330,000 if you are not already in a bring forward arrangement. If you balance is greater than or equal to $1.9m then you cannot make any non-concessional contribution. There are gradations between these TSBs and for more info please seek financial advice.
Benefits for Bring Forward and Catch-Up Provisions
The arrangements may suit those with irregular income, such as freelancers, self-employed individuals, or those who receive variable income throughout the year, so that they can make larger contributions in periods of higher earnings. This can also help them offset the potential income tax liability, while simultaneously increasing their retirement savings.
The bring-forward arrangements are also beneficial if you have financial windfalls from bonuses, commissions, inheritances and such.
One thing to consider is the timing of the contributions to ensure you don’t exceed the cap in any given year; this is one of many aspects of Superannuation Planning and Advice that your Green Associates Financial Planner can assist with.
At Green Associates, we can create a strategy for you that minimises tax while boosting retirement savings; get started with a consultation for our Superannuation Advice and Planning service.
As part of our Superannuation Advice and Planning service to you, we stay abreast of these for you and review and adjust your strategy accordingly. This also includes when your personal circumstances or financial goals change.
Here are some FAQs about the non-concessional contribution cap.
What is the purpose of non-concessional contribution cap?
The purpose of the cap is to ensure fairness and control in the super system by preventing people from taking advantage of the tax benefits. Therefore, if you contribute more than the cap, there will be repercussions, which we outline below in some FAQs.
As The cap can change from year to year, it’s a good idea to stay updated on the current rules and regulations set by the Australian Government.
What is the advantage of making non-concessional contributions?
The main benefit of making non-concessional contributions is that they’ve already been taxed so they are not subject to additional tax when withdrawn in retirement; this provides potential tax advantages compared to other forms of savings and investments.
If I take money out of my super and put it back later, does it count as a new non-concessional contribution?
Generally, yes.
It is assumed that you have already paid taxes on that amount and so when you contribute it back into your super fund, you’re essentially adding after-tax money, which is a non-concessional contribution.
However, there is an exception to this rule. If you claime a tax deduction for some or all of the contribution, it will convert the amount claimed of the non-concessional contribution into a concessional contribution.
If I have more than one fund, do I get more than one cap?
No. The total of all your non-concessional contributions across all funds count towards your cap.
You can locate lost super and combine multiple super accounts by the ATO myGov’s website. There are implications in combining funds and you should be confident that you are aware of the implications. Alternatively, under our Superannuation Planning and Advice service, we can help you do this.
What happens if I exceed the contribution cap?
The excess amount is included in your assessable income and taxed at your marginal tax rate.
Exceeding the non-concessional contribution cap may also result in excess contributions tax. This tax is levied at the top marginal tax rate on the excess contributions amount.
The non-concessional super contribution cap can truly be leveraged to provide the potential for greater retirement income and financial security in the future. However, it is vital to be mindful of the many regulations and complications and seek advice to avoid potential tax implications and more.
At Green Associates, we are passionate about helping you manage, protect and grow your wealth. An appointment with a Green Associates Financial Planner is a solid starting point to review your super strategy so you can feel confident about your finances and live how you want, now and into the future. Book an appointment to get started today.
At Green Associates, all of our advisers are fully licensed and listed on the ASIC Moneysmart Financial Adviser Register. Green Associates is committed to providing the best solutions for you and your wealth-creation journey.