Super: Is it time to review your investments?
You may be missing out or taking unnecessary risks if you take a set-and-forget strategy to your super.
This makes sense as, by staying within the super contributions caps, you can reduce the amount of tax you need to pay. These limits or caps generally depend on your age and the type of super contributions you make.
Below we take a look at what you need to know about concessional and non-concessional super contributions:
1. Concessional (before-tax) super contributions
These are super contributions you make before you pay tax on them. They generally include:
Concessional super contributions are generally only taxed at 15 per cent, which means you could lower your taxable income.
What is the concessional super contributions cap?
As of 1 July 2017, you can make up to $25,000 in concessional contributions in a financial year. If you go over this cap, additional tax applies.
What happens if you go over the concessional super contributions cap?
The amount of your excess concessional super contributions is included in your assessable income and you pay an interest charge.
If you do not choose to withdraw your excess concessional contributions from super, the excess will also count towards your non-concessional superannuation contributions cap.
2. Non-concessional (after-tax) super contributions
These are superannuation contributions you make from sources that have already been taxed. They generally include:
What is the non-concessional super contributions cap?
From 1 July 2017, these contributions are capped at $100,000 a year. If you’re under age 65 any time during a year, you’re able to apply the ‘bring-forward’ rule. This allows you to make up to three years’ worth of non-concessional contributions totaling $300,000 at any point during a three-year period.
In addition, the Government no longer allows you to make any further non-concessional contributions once your total super balance reaches $1.6 million.
What happens if you go over the non-concessional super contributions cap?
You can choose to withdraw the excess non-concessional amount from super and 85 per cent of an ‘associated earnings amount’, or how much your excess contributions earned while in your super account.
The total amount of associated earnings will then be included in your assessable income for the year and taxed at your marginal rate.
Otherwise, excess non-concessional super contributions will be taxed at 49 per cent.
There are eligibility requirements to keep in mind:
For more information about super contributions and how they might impact your financial situation, speak to a financial adviser.