Superannuation caps control the amount you can place into superannuation each year without incurring penalty tax. Two types of superannuation contribution caps exist:
- Concessional contribution cap: this limits the amount of contributions to superannuation that are made from pre-taxed income. Employer-paid super guarantee amounts, salary sacrifice amounts and tax-deductible personal contributions are all included within this cap
- Non-concessional cap: this applies to contributions made to superannuation from after-tax income. Examples of such income include your after-tax salary, wages or savings. Certain investment transfers to your self-managed super fund can also fall within this cap, such as listed shares.
From 1 July 2014 the superannuation concessional contribution caps have been increased as follows:
- People aged 50 years and over: the concessional contribution cap has increased to $35,000
- People aged under 50: the general concessional cap has increased to $30,000
The non-concessional contribution cap for a financial year is six times the general concessional contribution cap. So it has also increased to $180,000. As such, the three year ‘bring forward rule’ has also increased to $540,000 from 1 July 2014. The ‘bring forward rule’ allows people aged under 65 to access a non-concessional cap of $540,000 over a fixed three year period. This fixed period starts once you have made non-concessional contributions of more than $180,000 in a financial year, thus allowing you to contribute large amounts to superannuation in a short period.
Why contribute more to superannuation? Certainly the primary reason is that this will help your retirement savings grow and leave you in a more secure position once you finish up your working years. Yet in some circumstances, making more super contributions can reduce the amount of income tax you pay.
Planning and making your superannuation contributions can be greatly benefited by some expert guidance. Ganrid and Associates are here to help you with any aspect of making superannuation contributions.