What are concessional contributions to a superannuation fund?

While most Aussies are required to make super contributions every year, the amounts they contribute can vary significantly. As an employee, you may receive several types of contributions to your superannuation, or super, fund, whether from your employer, your spouse, or yourself. Some of these contributions, called concessional contributions, may qualify for a lower tax rate depending on the sum deposited during the financial year and the amount previously saved in your super fund. If you exceed the superannuation fund’s concessional contribution limits, the contribution can be considered non-concessional and taxed at the same rate as your earnings. 

What is the annual concessional superannuation contributions cap?

Your super fund may qualify for a lower tax rate of 15 per cent if the total of your concessional super contributions does not cross $25,000. This total can include concessional super contributions like: 

1. Super contributions made by your employers, such as superannuation guarantee, or SG contributions, and related payments such as insurance premiums
2. Salary-sacrificed or other tax-deductible super contributions made by you
3. Super contributions you split with your spouse and deposit to their super fund.

You should remember that the concessional tax rate only applies to the super contributions received by your super fund. If any contribution to your super fund is delayed beyond the latest stipulated date for a particular financial year, it will be considered as part of the following financial year. For this reason, you should keep track of all your super contributions and especially those made by others. Note that the concessional tax rate applies to self-managed super funds as well. 

Suppose you end up receiving over $25,000 in concessional super contributions in one financial year. If you don’t take any action, the excess amount may be considered a non-concessional contribution, which means it’s ineligible for any tax deductions. You should check that, by doing so, you won’t exceed your non-concessional contributions cap for that year. Alternatively, you can request to release, or withdraw, the excess amount from your super fund. 

On the other hand, if you receive concessional super contributions totalling less than $25,000 during a financial year, consider checking if you can carry forward the unused contribution limit. 

Can I carry forward excess concessional superannuation contributions?

If you don’t receive superannuation guarantee contributions or are otherwise only temporarily employed, you may not earn enough to contribute a significant amount to your super fund. As a result, the concessional super contributions you receive may add up to much less than the $25,000 limit. You may then qualify to carry forward the difference between $25,000 and your actual concessional super contributions. However, for such actions, the balance in your super fund at the end of the previous financial year should be under $500,000. You can only carry forward unused concessional superannuation contributions from the past five years.

You should remember that the carry forward rule only applies from the 2018-2019 financial year, which means that you may not be able to carry forward any leftover concessional contributions cap from prior years. Suppose your super fund had a balance of $450,000 on June 30, 2019, and you received $10,000 in concessional super contributions for the financial year 2019-2020. You can carry forward $15,000, which is $10,000 less than the annual concessional superannuation contributions cap of $25,000. You can look up details regarding the amount you can carry forward by logging into your myGov account, after linking it to the Australian Taxation Office.  

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