SMSF contribution cap & tax

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on September 27, 2021
SMSF contribution cap & tax

The ATO limits the amount you can contribute to your super each year. These contributions fall into two categories, concessional and non concessional.

Concessional contributions

Concessional contributions are contributions made that are included in the SMSF's assessable income. These contributions are taxed in your SMSF at a ‘concessional’ rate of 15%.

This is often called ‘contributions tax’, and the current concessional contributions cap is $27,500. The most common types of concessional contributions are those made by an employer, such as super guarantee and salary sacrifice contributions.

Concessional contributions include: 

  • Compulsory employer contributions.

  • Additional concessional contributions your employer makes.

  • Salary sacrifice payments.

  • Administration fees and insurance premiums.

Concessional contributions also include personal contributions when the member claims an income tax deduction.

Non-concessional contributions

Non-concessional contributions include personal contributions made by the member for which no income tax deduction is claimed.

On the other hand, non-concessional contributions do not include:

  • Super co-contributions.

  • Structured settlements.

  • Orders for personal injury or capital gains tax (CGT) related payments that the member has validly elected to exclude from their non-concessional contributions.

Contribution type

Cap from 1 July 2021

Tax rate period

Concessional

$27,500 per year

Plus carry forward amounts since 1 July 2018.

15% contributions tax

or 30% contributions tax if your income plus contributions is more than $250,000 per year

Non-concessional

$110,000 per year

No contributions tax - but you do pay your normal income tax, which can be up to 47%

Source: ABS

What is the carry-forward rule?

If your total super balance is less than $500,000 at 30 June, you can ‘carry forward’ any concessional contributions over a five year period.

This means if you don’t use the full amount of your concessional contribution cap ($27,500 in 2021-22), you can carry forward the unused portion up to five years later.

Carry forward amounts expire after five years if you haven't used them.

What is the bring-forward rule?

If you’re under age 67, you can bring forward up to three times your non-concessional (after-tax) contribution cap – up to $330,000.

However, once you turn 67, you will need to meet the work test or work test exemption to make your own contributions to your super.

Caps

Your cap may be higher if you did not use the full amount of your cap in earlier years. This is called the carry-forward of unused concessional contributions.

You can check your available concessional contributions cap on ATO online services (accessed via myGov).


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Image by Christian Bown via Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Aaron joined Savings.com.au in 2021. He is a finance journalist with a keen interest in property, the share market, and improving financial literacy in young Australians.

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