Superannuation contributions offer various tax-effective options that can significantly enhance your retirement savings. Understanding the different types of contributions – such as concessional and non-concessional contributions – can help you maximise your super balance while minimiising your tax liability.
Each type of contribution has specific benefits and limits, making it essential to tailor your strategy to your financial situation and retirement goals.
Concessional Contributions
Concessional contributions (CCs) are those made into your super fund before tax is deducted.
They commonly include:
- contributions made for you by your employer
- salary sacrifice contributions, and
- personal contributions that you claim as a personal tax deduction
CCs (within your cap – see below) are taxed at the concessional rate of up to 15% (or up to 30% if your income from certain sources exceeds $250,000) within your super fund. However, additional tax and penalties may apply for contributions made in excess of your cap.
Catch-up contributions
Caps apply to limit the contributions you can make to superannuation without having to pay additional tax and other penalties. The cap that applies depends on the type of contribution made. Contributions that are considered to be ‘concessional contributions’ count towards the annual CC cap.
From 2018/19 to 2020/21, this annual cap was $25,000, which then increased to $27,500 from 2021/22 to 2023/24 (and is increasing to $30,000 in 2024/25). If you don’t fully utilise your CC cap in an income year (from 2018/19 onwards), you’re able to ‘carry forward’ the unused cap amount, and you may be eligible to make ‘catch up’ concessional contributions in a subsequent year.
Here’s your guide on how to monitor your carried forward concessional contributions and how to top-up your super with ‘catch-up’ contributions.
Non-Concessional Contributions
Non-concessional contributions(NCCs) are made from your after-tax income and are not subject to the same tax treatment as concessional contributions.
NCCs commonly include:
- personal contributions for which a tax deduction is not claimed
- spouse contributions
- excess concessional contributions not released from super, and
- certain amounts transferred from a foreign super fund.
Bring-forward rule
Like other contribution types, there are limits on the total amount of NCCs you can contribute to super and penalties apply if limits are breached.
For more information on excess contributions, see ato.gov.au.
In 2023/24 the annual NCC cap is $110,000 (and increasing to $120,000 in 2024/25). However, depending on your total super balance, you may be able to use the bring-forward rule to make even larger contributions sooner. This rule may enable you to bring
forward up to two years’ worth of NCCs.
Here’s your guide on how to access your NCCs information on myGov.
Conclusion
Understanding the differences between concessional and non-concessional contributions, and utilizing features like catch-up and bring-forward provisions, can help optimize your superannuation savings. Proper management of these contributions ensures you make the most of your super and prepare effectively for retirement.
To learn more about super contributions, feel free to make an appointment with us to discuss.
