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Understand the limits to tax-effectively grow your super
Making additional contributions to your superannuation is a great way to build your retirement savings, but there are limits set by the Australian Government on how much you can add. Contributing too much could mean extra tax, so it pays to understand how the contribution caps work.
Before-tax contributions are also called ‘concessional contributions’ and include super from your employer, money you've put into your super from your before-tax pay (salary sacrificed contributions), and any contributions where you've claimed a tax deduction.
After-tax contributions are also called ‘non-concessional contributions’ and include money you put into your super account from your after-tax income, and contributions from your spouse.
Before-tax contribution cap: $25,000 per year1 (or higher if you have carry forward before-tax contributions).
After-tax contribution cap: $100,000 per year (or $300,000 over three years if certain conditions are met). Nil if your total superannuation balance is $1.6 million or more.2
If your total super balance is less than $500,000 at 30 June, you can ‘carry forward’ any concessional contributions over a rolling five-year period. This means if you don’t use the full amount of your concessional contribution cap ($25,000 in 2020-21), you can carry-forward the unused portion and take advantage of it up to five years later.
For example, if you receive $10,000 in before-tax contributions in 2020-21, the $15,000 unused portion of your cap is effectively rolled over and added to your concessional cap for 2021-22, so you would be able to receive up to $40,000 in before-tax contributions in that financial year.
Amounts carried forward that have not been used after five years will expire.
If you’re under age 65 you can 'bring forward' up to three times the amount of the after-tax contribution cap – so up to $300,000. However, if you turn 65 during the financial year, you will need to meet the work test to contribute on, or after, your 65th birthday. Account balance conditions apply if you have more than $1.4 million in super:
For these purposes, your total superannuation balance is determined on 30 June of the previous financial year.
What happens if you go over the contribution caps depend on whether your contributions are before-tax or after-tax.
Any contributions you make over your before-tax limit will be taxed at your marginal tax rate. You may also be taxed for making excess contributions and interest charges may apply (with an entitlement to a 15% offset).
If you exceed the cap, the Australian Taxation Office (ATO) will send you details after you lodge your tax return. From there, you have a few options:
If you decide to leave the excess funds in your super account, you can elect to pay the additional tax and charges yourself or send the ATO a release authority and they will direct QSuper to pay the excess from your account on your behalf. Any amounts released will no longer count towards your non-concessional contribution cap.
If you exceed your after-tax contributions limit, the ATO will send you details after you lodge your tax return. From there, you have two options:
It's important to keep an eye on your contributions throughout the year, including any you make to other superannuation funds.
Log in to Member Online to review your contributions throughout the year.
Get advice about growing your super over the phone, at no additional cost.4
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1. If you’re a Defined Benefit account member, we use a formula to calculate the concessional contributions associated with your account, which are called notional taxed contributions. Special rules apply for members who had an existing defined benefit account at 12 May 2009.
2. At 30 June of the previous financial year.
3. Earnings are assessed at your marginal tax rate.
4. For Income and Accumulation account members who receive personal financial advice from QInvest (ABN 35 063 511 580, AFSL 238274), the QSuper Board may pay for some or all the advice fee for advice related to your QSuper benefit. Eligibility conditions apply. Refer to the Financial Services Guide for more information.