Super contributions explained

What do retirees need to know?

Rules covering contributions to super can be challenging to understand. The following overview looks at the two broad categories of contributions and then focuses on those rules that affect retirees the most.

What are the different types of contributions?

All super contributions fit into two broad categories depending on whether the contribution is made before tax or after tax, more commonly known as concessional or non-concessional contributions.

Retirees  are governed by the same contribution caps as the employed and self-employed. The general concessional contribution cap is $27,500 per financial year and the general non-concessional contribution cap is $110,000 per financial year.

Pre-tax (concessional) contributions

Before-tax contributions are known as Concessional Contributions because they qualify for the low (concessional) 15% tax rate. Concessional Contributions include:

• all employer contributions (including Superannuation Guarantee (SG) contributions
• any contributions you make to your super for which you can claim a tax deduction – for example contributions made by self-employed people
• salary sacrifice contributions
• some  super contributions you split with your spouse.

Pre-tax contribution limits

There is a limit of $27,500 that you can add to your super before-tax in the 2022-2023 financial year. If you go over your annual concessional contributions cap you could potentially end up paying extra tax. The ATO will issue you with an excess concessional contributions determination and advise you what actions you can take..

Any amount you add to your super above the before-tax limit will also be counted as an after-tax contribution.

After-tax (non-concessional) contributions

After-tax contributions are known as Non-Concessional Contributions because they do not qualify for any tax concessions. Non-Concessional Contributions include:

any contributions you  or your employer make from your after-tax salary
any before-tax amount that exceeds the concessional contributions limit
contributions your spouse makes to your super
most transfers from overseas super funds
amounts you withdraw from your super and then add back in to your super

After-tax contribution limit

You can add up to $110,000 each year in non-concessional contributions.  Using the bring forward provisions, see below, you could contribute up to $330,000 in a particular year if you meet the bring forward conditions.  .

Age limits on super contributions.

Whether you are working or not, you can continue to contribute to your super account if you are under age 75. If you are making personal contributions and wish to claim a tax deduction for this, you will then need to meet the work test (see the tax office related exemption rules).

Exceptions to the contribution limits

There are a couple of ways in which people can exceed the annual contribution limits without any penalties.  These can be especially beneficial to older Australians who might be looking to build up their super balance.

Carry forward rules

Carry-forward rules allow you to take any unused pre-tax contributions cap amounts if your total super balance is below $500,000 on 30 June in the previous financial year. This can happen for up to five years.

The bring forward rule

The bring-forward rule applies to non-concessional contributions. It allows you to exceed the $110,000 annual limit and contribute up to $330,000 – three years of contributions -in a single year, with certain age and balance restrictions. Read more about ATO rulings on the bring forward arrangement here.

In need of further assistance?

Nobody would pretend that the rules of superannuation are ever that easy to follow. The fact that they seem to keep changing, regardless of for better or worse, just makes it more difficult to know if you are working within the rules, while maximising your retirement income.

Retirement Essentials qualified advisers offer specific one-hour consultations to help you navigate the complexities of retirement income and feel reassured that you fully understand all the necessary information.

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This article is provided by Retirement Essentials Representative Number: 001260855.  We are an authorised representative of SuperEd Pty Ltd ABN 88 118 480 907 AFSL #468859.  This information is not intended as financial product advice, legal advice or taxation advice. It does not take into account your personal situation, goals or needs and you should assess your own financial situation, consider if the information is suitable for you and ensure you read the relevant Product Disclosure Statement (PDS) if you choose to make any changes to your financial situation. It is always advisable to consult a financial adviser before making financial decisions.