Superannuation contributions - a 2024 refresher

Making contributions to super is one of the simplest ways to improve your final retirement balance and reduce your individual tax bill. This article aims to summarise the main types of contributions, eligibility requirements and the annual cap.

There are two main types of super contributions:

Concessional contributions 

Concessional contributions include employer mandated (super guarantee) contributions, salary sacrifice contributions, and personal contributions for which you claim a personal tax deduction.

For personally deductible contributions, if you are over the age of 67, you must meet the ‘work test’ to be eligible to claim a deduction for your contribution.

Concessional contributions are taxed at 15% when they are received by your super fund.

It is also important to be aware of Division 293 too, which we will explain further on.

Non-concessional contributions

The common types of non-concessional contributions include:

  • Personal contributions you make from your own money that you do not claim a deduction for
  • Contributions you make for a spouse
  • Contributions you make for a child under the age of 18

Non-concessional contributions are not taxed when they are received by your super fund.

Individuals over the age of 74 are not eligible to make this type of contribution.

The contribution limits for 2023/24 are:

Concessional contributions

  • $27,500 per annum

Non-concessional contributions

  • $110,000 per annum – for those with a total super balance* less than $1,900,000 at 30 June of the prior year
  • $nil – for anyone with a total super balance* of $1,900,000 or more at 30 June of prior year

Special conditions:

Concessional contributions

Individuals with a total super balance* less than $500,000 may be eligible to carry forward up to five years of unused concessional contributions. This involves utilising prior year unused concessional contribution in a future financial year.

Non-concessional contributions

Individuals may be eligible to utilise the ‘bring-forward’ provision, where they can contribute more than the annual cap at once. These rules are: 

  • Individuals with a total super balance* under $1.68M at 30 June 2023 can bring-forward an additional two years’ non-concessional contributions (i.e. $330,000 total contribution).
  • Individuals with a total super balance* under $1.79M at 30 June 2023 can bring-forward an additional one years’ non-concessional contributions (i.e. $220,000 total contribution).

It is important to note that you must ensure you have not triggered the “bring-forward” rule in the prior two financial years if you are looking to use this provision.

The limits apply to the total of your contribution, even if they came from multiple sources.

Contributions are normally made by arranging a bank transfer. In some instances, listed assets or commercial property can be contributed in the form of an in specie contribution.

Other contributions and considerations:

CGT small business contributions

If you sell a business and meet certain conditions, there are special rules that allow you to make extra super contributions. This contribution has its own annually increasing cap of $1,705,000 (in the 2023/24 financial year). The eligibility and contribution value available is dependent on each personal situation.

The rules around superannuation contributions can be complicated. If you are thinking of making contributions to super, speak with your accountant or adviser so they can help you unravel the complexity and identify strategies to maximise the tax benefits.

Downsizer contributions

This is a special type of contribution, available to individuals over the age of 55 who have sold their primary residence that they have owned for at least 10 years. The lifetime cap is $300,000 per person (a combined $600,000 per couple).

Division 293 tax

If your income and concessional contributions exceed $250,000 in 2024 financial year, you may have to pay an additional 15% tax on some or all of your concessional contributions, known as Div 293 Tax. As an example, Mary earns a salary of $250,000 and her employer contributions for the year are $27,500.

As Mary’s salary plus her concessional contributions exceed the income threshold of $250,000, she will pay 15% contributions tax on her employer contributions, and will also be liable for Div 293 tax.

For many people in this situation, concessional contributions are still worthwhile. Even though you may pay tax on your concessional contributions at 30%, this is still less than the top marginal tax rate of 47% (including Medicare levy) that generally applies to high income earners who are liable for Div 293 tax.

*‘Total Superannuation Balance’ is the value of your total superannuation interests in all superannuation funds at a point in time.

 

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Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.