There are limits on how much money you can put into super each year without penalty. These are called ‘contribution caps’.
There are two types of super contributions:
- before-tax (concessional)
- after-tax (non-concessional)
Before-tax (concessional) contributions
Before-tax contributions include:
- employer contributions including super guarantee (SG) and other compulsory contributions
- salary sacrifice
- personal contributions you've successfully claimed a tax deduction for.
After-tax (non-concessional) contributions
After-tax contributions include:
- personal contributions you haven't claimed a tax deduction for
- spouse contributions
- any excess concessional contributions.
Two types of caps
Before-tax (concessional) contribution cap
The before-tax contribution cap is the limit that applies to before-tax contributions made to your super in a financial year before extra tax kicks in. For the 2018-19 year, it's $25,000 each year, regardless of your age.
From 1 July 2018, you can carry forward the unused portion of your before-tax contribution cap for up to five years if your total super balance was less than $500,000 at the end of the previous financial year. The unused cap amounts will start to be carried forward from 1 July 2018, so you’ll be able to access these amounts in the 2019-20 financial year. Amounts carried forward that haven’t been used after five years will expire.
After-tax (non-concessional) contribution cap
The after-tax contribution cap is $100,000 for 2018-19.
A helpful tip for after-tax contributions
If you’re under 65 at any time during the financial year and your total super balance is less than $1.6 million, you may be able to bring forward two year’s worth of after-tax contributions. This means that you could contribute up to three times the annual cap in one year (but less in future years) if you’re eligible.
Transitional arrangements apply for members who have made after-tax contributions in the 2015-16 or 2016-17 financial years, but haven’t fully used their ‘bring forward rule’ before 1 July 2017.
What if you exceed the caps?
The government taxes contributions above the cap at your marginal rate. But you’re allowed to withdraw any excess concessional contributions from your super account.
If you go over a contribution cap, you’ll receive an excess contributions tax assessment from the ATO. You’ll have to pay the excess tax yourself and/or by drawing on your super.
It’s important to realise that any concessional contributions over the cap will also count towards your non-concessional contributions cap.