What are personal superannuation contributions?

Whether you’re self-employed and paying your own super or receiving superannuation guarantee (SG) contributions from an employer, you can choose to make extra contributions to a super fund from your wages. Such contributions are called non-concessional contributions and are paid from your after-tax income. People tend to make extra contributions on top of compulsory employer payments to increase the money they have at retirement.

You can make these super contributions if your super fund balance was less than the transfer balance cap of $1.6 million at the end of the previous financial year. These are also different from the salary sacrifice super contributions that some employers may allow you to make, which are deducted from your before-tax wages.

Are there limits on personal superannuation contributions?

Typically, personal superannuation contributions limits are capped at $100,000 a year. But how much you can add also depends on the size of your super fund balance. Suppose your super fund balance was $1.5 million on July 1, 2019. You could then make the maximum personal super contribution, which is $100,000, to your super fund during the 2019-2020 financial year. However, you couldn’t have made any personal super contributions in 2020-2021 since your super fund balance would have touched $1.6 million on June 30, 2020. Note that the non-concessional contributions allowance of $100,000 may only be available to those older than 65 if they meet the criteria set by the Australia Taxation Office (ATO).

Depending on your super fund balance, you may be able to contribute more than the yearly limit if you choose to bring forward your super contributions. Someone with a super balance of $1 million at the end of the financial year may be able to contribute as much as $300,000, including personal super contributions for the next two financial years. If you exceed the super contribution limit, the ATO will send you options regarding next steps (also called a determination). Usually, you’ll need to withdraw the excess super fund balance or pay a 47 per cent tax on the excess contributions. 

Consider checking whether your super fund has specific rules that can prevent withdrawing super benefits. For instance, if you’re contributing to a defined benefit super fund, you may not be able to withdraw any benefits.

Can you claim a tax deduction for personal superannuation contributions?

If you are under the age of 65, you can often claim a deduction on personal super contributions that fall below the cap. However, you’ll need to confirm that your super fund accepts tax-deductible personal super contributions. For instance, you may be a member of a Constitutionally Protected Fund (CPF) or a super fund that has notified the ATO that member contributions are not tax-deductible. Also, you’ll need to submit a notice of intent to your super fund before you can claim a tax deduction on your contribution. If you’re splitting super contributions with your spouse, you’ll need to wait until your super fund has accepted your notice of intent before filing the super contributions splitting application.

If you are between 65 and 74, you can claim a deduction if you meet a ‘work test’. This generally means you need to work at least 40 hours in a 30 day (consecutive) period. Financial advisers and super funds can usually tell you more about the work test.

Keep in mind, tax-deductible personal super contributions are counted towards your concessional contribution cap, for which the maximum possible contribution is $25,000 in any financial year. It’s important to ensure you don’t end up crossing the contribution limit. Doing so can result in the excess amount added to your non-concessional contributions that are assessed at a much higher tax rate. Instead of paying a tax rate of 15 per cent on your super contributions, you could risk paying a tax of 47 per cent.

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