A concessional contributions cap is the amount you can pay (tax effectively) into your super in any given year.

About concessional contributions caps

Concessional contributions include the compulsory 9.5% super payments made by your employer, any additional super payments made by your employer (above 9.5%) and any additional payments you salary sacrifice from your salary. The reason they are called ‘concessional’ is because these payments are taxed at 15% and not at your marginal income tax rate.

The dollar amount of all these contributions added together is currently capped at $25,000 per financial year

What if you exceed the cap?

If you exceed your cap (as shown above, depending on your age) any excess payments will be subject to tax at your marginal tax rate plus an interest charge. As you have already paid 15% tax on your contributions upon entry into your super fund there is a tax offset to take this into account. For example, if your marginal tax rate is 39%, you will incur an extra 24% tax on this amount in excess of the cap plus the interest charge.

If you find yourself in this position, and you are unsure of the rules on what to do, you can contact Harvest to help you work through your options.

Some things to know about contributions caps

  • Check the timing of contributions, yours and your employers, to make sure you don’t exceed your limit.
  • Check that your super fund has your tax file number, otherwise you will end up paying 49% tax on your concessional contributions instead of 15%.
  • If you earn less than $37,000 you can receive a refund of the contributions tax deducted from your super account, up to $500.
  • If you earn more than $250,000 you will pay a contributions surcharge of 15% bringing your super tax rate up to 30% on earnings above this amount.

The value of advice

Everybody’s situation is different, and concessional contributions caps are quite a complex area of superannuation. It is worth the time to think through your requirements, take advice and gain control of your superannuation benefits.

You may benefit from talking with an adviser at Harvest Financial Group. To discuss your advice needs call 02 8908 4300 to make an appointment.