Contributions caps - there's a limit
What are the super contributions caps?
The super contribution caps for the 2023/24 year are:
|Before-tax or concessional contributions cap||$27,500 per year|
|After-tax or non-concessional contributions cap||$110,000 per year
$330,000 over three years.
If you contribute too much you may have to pay extra tax and a charge.
What is the concessional contributions cap?
For 2023/24, the concessional contribution cap is $27,500 per year. This covers all before-tax contributions - employer super payments, salary sacrifice and the personal contributions you claim as a tax deduction. If you earn less than $250,000 p.a. these contributions are taxed at 15% (concessional rate). If you earn above that, contributions are taxed at 30%.
How to carry forward unused concessional contributions
If you don't reach the before-tax contribution cap one year, you may be able to carry over the unused portion to future years. This is known as the carry forward rule (concessional contributions). You can carry forward unused caps for up to five years, as long as your super balance is less than $500,000 at 30 June.
For example, if your total before-tax contributions last year were $20,000, you can carry over the remaining $7,500 contribution limit to this year, and therefore contribute up to $35,000 before tax, without being penalised.
Note, this is not the same as the bring forward rule which is only for non-concessional (after tax) contributions.
What is the non-concessional contributions cap?
The non-concessional (after tax) contributions cap for 2023/24 is $110,000 p.a. - or under certain criteria $330,000 over three years. These contributions are voluntary payments to your super that aren't claimed as a tax deduction and are not taxed when paid to your super. But your total super balance must be less than $1.9 million.
Non-concessional contributions can also include contributions your spouse makes into your super account and transfers from foreign super funds such as KiwiSaver.
How to bring forward non-concessional contributions
The bring-forward rule (non-concessional contributions) allows you to use the $110,000 after-tax contribution caps from future years, and apply them to a single year. As long as you are under 75 years of age in the first year, you can use the caps from the next two years, making it possible to contribute up to $330,000 in one year without penalty. Of course, it means you reduce your limit for the next year or two.
Simply put, as long as your average annual contributions over three consecutive years is $110,000 or less, then you won't be penalised.
I paid too much, what do I do?
Don't panic! But do take action as there is an excess contribution charge.
- If your before-tax contributions are over the cap you can choose to withdraw up to 85% of the excess.
- If your after-tax contributions are over the cap try the bring forward rule above.
- If you are stuck, talk with your Industry SuperFund.
I'm over 67, do the contribution caps still apply?
Yes, the contribution caps still apply.
Example - caps at work
Jane wants to boost her super.
She earns $60,000 per year and her employer puts in 11% super, which is $6,600 per year. Jane then asks her employer to also pay some of her salary directly into her super account instead of her bank account.
This is salary sacrificing and this part of her income is only taxed at 15% instead of the 34.5% she would normally pay (income tax plus Medicare levy).
The contribution cap is $27,500 p.a., of which $6,600 has already been paid by Jane's employer. This means she can salary sacrifice up to a further $20,900 per year at the 15% tax rate. Or she can make a personal super contribution and claim a tax deduction - this type of contribution is counted under the before-tax contribution cap.
She decides to salary sacrifice as she will gain the tax benefit sooner, she chooses $10,000 giving her a $1,950 tax saving ($3,450 income tax and Medicare saving, less $1,500 super contributions tax).