How to help ensure your superannuation contributions don’t exceed the caps
Changes in the superannuation contribution caps, which kicked-in last year, give an added reason to keep a close eye on your contributions.
From 1 July 2017, the concessional contributions cap was reset to $25,000 for everyone (irrespective of age).
For those earning a salary of $210,000 or more – the compulsory Employer Superannuation Guarantee of 9.5% will total around $20,000 a year and will see your contributions edge close to the cap. For those making additional concessional contributions, such as through salary sacrifice – they may be close to reaching the maximum if they are earning $180,000 (including superannuation guarantee) and contributing an extra 3% or earning $150,000 (including superannuation guarantee) and contributing an extra 5%. In certain cases, employers will match an employee’s additional contributions and in this case, the concessional cap might be exceeded.
Going forward, the concessional cap will increase in increments of $2,500 (not $5,000 as was previously the case). There is a formula the ATO applies to determine when indexation takes place, and the concessional cap will remain at $25,000 for 2018/19 also.
From 1 July 2017, the annual non-concessional (after tax) contribution cap reduced from $180,000 to $100,000 per year.
However, the non-concessional cap will be nil for a financial year if you have a total superannuation balance greater than or equal to the general transfer balance cap ($1.6 million in 2017–18) on 30 June of the previous financial year. As a result, if you had more than $1.6m in super at 30 June 2017, you cannot make further non-concessional contributions this year. You may, however, still be able to make or receive concessional contributions up to the $25,000 cap.
Provided you are under 65 or aged between 65 and 74 and meet the relevant work test, and meet all other requirements, you may be able to make contributions to super this year. But it is important to monitor your level of contributions as penalties can be imposed where you exceed the relevant caps.
Using the ‘bring forward’ rule for your contributions
There are special circumstances where you may exceed the annual non-concessional cap amount, and this is called the ‘bring forward’ rule. The rules have become more complex since 1 July 2017.
How it works is if you are under 65 and have less than $1.5m in super as at 30 June 2017, you may be able to contribute at least $200,000 as a non-concessional this financial year. If you had less than $1.4m at that time, you may be able to contribute up to $300,000.
However, you might not be able to do this if you started using the bring forward rule in either of the last two financial years. Or the amount you can contribute might be reduced.
The amount you contribute this financial year may impact how much you can contribute in future years, and each year you still need to have less than $1.6m (or the relevant general transfer balance cap for that year) in super in order to make further contributions.
Contribution rules and limits can be difficult to follow, so it may be worth seeing help from a professional adviser to work out what your options are.
We strongly recommend that clients who have any potential concerns regarding super contributions or contribution caps, that they contact their adviser immediately. For specific advice, speak with your OBT financial adviser on 5462 2277. Rodney Turner and OBT Financial Group are Authorised Representatives of Lonsdale Financial Group Ltd ABN 76 006 637 225 | AFSL 246934.
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial planner and seek tax advice from a registered tax agent. Information is current at the date of issue and may change. This information and certain references, where indicated, are taken from sources believed to be accurate and correct. To the extent permitted by the Law, Lonsdale, its representatives, officers and employees accept no liability for any person that relies upon the information contained herein. Information is current at the date of issue and may change.