Current Superannuation Contribution Limits
Superannuation is currently a highly tax effective means for permanent Australian tax residents to save for their retirement in Australia.
Contribution caps apply to limit access to these tax concessions by restricting the amount that can be contributed to superannuation funds. For the year ending 30 June 2016 these are:
Concessional (Tax Deductible) Contributions
- General cap $30,000
- Aged 49 or over on 30 June 2015 $35,000
These contributions are subject to a 15% contributions tax applied to the superannuation fund. An additional 15% tax may apply for taxpayers whose prescribed income as defined exceeds $300,000. Prescribed income includes concessional contributions up to the contributions cap, reportable fringe benefits and investment losses.
Non-Concessional (Non-Deductible) Contributions
- General $180,000
- Three year bring forward rule (under age 65) $540,000
These amounts are not subject to contributions tax.
Small Business CGT Contributions
If you sell an active small business CGT asset as defined or a company or trust in which you are a significant individual sells an active business asset the following contribution caps are potentially available where the asset holder qualifies as a small business entity or satisfies a $6 million net asset value test:
- Assets held less than 15 years $500,000
- Assets held more than 15 years and individual aged 55 or over and retiring $1,395,000
The small business CGT caps are lifetime limits and not annual limits.
Penalties for Exceeding the Contribution Caps
Substantial tax penalties apply for exceeding the above caps. If in doubt it is better to err on the side of caution. Always seek appropriate advice.
Superannuation Guarantee Charge (SGC) Contributions
The SGC requires employers to provide a minimum level of superannuation support for their employees earning $450 per month or more.
The current contribution rate is 9.5% of salary and wages up to $50,810 per quarter (ie maximum SGC contributions are $4,827 per quarter). Individuals who have several employers may breach their concessional contributions cap purely as a result of SGC contributions.
Tax Deductions for Superannuation Contributions
Employer contributions to complying superannuation funds are normally tax deductible.
Individuals cannot claim a tax deduction for personal superannuation contributions unless no more than 10% of their income (including reportable fringe benefits and reportable superannuation contributions) is from employment.
Political Risks with Superannuation
The current superannuation tax concessions are seen by some sectors to be generous. There is a risk that a future government might reduce these concessions, for example, by taxing currently exempt pension fund income above a threshold amount.