The following blog post is sourced from Lakeside’s Financial Knowledge Centre.
Know your limits – changes to super contribution caps
Written and accurate as at: May 06, 2014
From 1 July 2014, the non-concessional (after-tax) and concessional contributions limits will increase as a result of indexation in line with average wages (AWOTE).
Non-concessional contributions are personal superannuation contributions that you make or your spouse may make voluntarily to your super fund from your after-tax income. You are not able to claim a tax deduction from non-concessional contributions. The current annual limit for Non-Concessional Contributions (NCC) is $150,000 per annum. From 1 July 2014, the non-concessional contribution cap will increase to $180,000 per annum.
If you are under age 65, then this increase will also apply to the bring-forward provisions, increasing the cap to $540,000.
It is important to note that if you have already triggered the bring forward provisions in the two previous financial years 2012/13 or 2013/14 then your limit remains $450,000 (the cap that was in place when the contribution was made) and you cannot take advantage of the indexation (additional $90,000 limit).
Concessional contributions are contributions made from before-tax income, or for which a tax deduction can be claimed. Concessional Contributions (CC) may include Employer Superannuation Guarantee Contributions (SGC), salary sacrifice contributions, and personal deductible contributions. All of these contributions will count to a single annual limit or cap.
- From 1 July 2014 there will be two types of concessional contributions caps, depending on your age. If you are aged 48 years or younger on 30 June 2014, your concessional contribution cap will be $30,000 in 2014/15. This is an increase of $5,000.
- If you are aged 49 years or over on 30 June, then your concessional contribution cap will be $35,000 in 2014/15.
Contribution caps are on a “use it or lose it” basis meaning that you cannot carry forward unused amounts to future financial years. If you are considering contributing to superannuation this financial year or in future it is important to first seek financial advice as significant taxation penalties can apply to amounts contributed to superannuation in excess of the relevant contribution caps. This tax could be as high as 47% for excess non-concessional contributions. In saying this, this month’s budget has proposed that contributions in excess of the thresholds could be subsequently withdrawn from superannuation without penalty, although we will need to wait and see if this proposal does in fact become law.
Making regular contributions to superannuation can make a big difference to your nest egg in preparation for retirement you just need to make sure you make super contributions in the way that best suits your circumstances.
This blog post has been sourced from Lakeside’s Financial Knowledge Centre. Click here to see more .