Update: Please refer to updates to superannuation from 1 July 2017 to see potential changes in contribution caps.
This article explains what the Salary Sacrifice Super Cap is, how to determine what your cap is and what happens if you exceed the cap.
The Superannuation Caps have been reducing over recent years and have reduced to a level where high income earners are now inadvertently exceeding the cap simply for being in receipt of compulsory SG contributions, without even making any personal voluntary contributions.
What is the Salary Sacrifice Super Cap?
The Salary Sacrifice Super Cap refers to the maximum amount that can be salary sacrificed without incurring additional ‘excess’ taxes. This is different from the SGC cap.
The following is important and is often forgotten when calculating the amount that can be Salary Sacrificed:
There is no cap specific to Salary Sacrifice contributions.
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There are only two type of contribution caps:
1. the Concessional Contribution Cap; and
2. the Non Concessional Contribution Cap
Salary Sacrifice contributions fall under the umbrella of a Concessional Contribution. Concessional Contributions are contributions that have been made into a superannuation account and a tax deduction has been claimed by someone for making that contribution. This includes SG Levy contributions, Salary Sacrifice contributions, Self-Employed contributions and Personal Concessional Contributions.
Non-Concessional Contributions are after-tax contributions, where a tax deduction has not been claimed by the contributor.
The Concessional Contribution Caps are as follows:
|INCOME YEAR||GENERAL CAP||CAP FOR THOSE AGED 59 OR OVER ON 30/6/13||CAP FOR THOSE AGED 49 OR OVER ON 30/6/14|
|2014-15||$30 000||$35 000||$35 000|
|2013-14||$25 000||$35 000||$25 000|
|2012-13||$25 000||$25 000||$25 000|
|2011-12||$25 000||$50 000||$50 000|
|2010-11||$25 000||$50 000||$50 000|
How to Determine YOUR Salary Sacrifice Super Cap
The caps relate to ALL Concessional Contributions. So, for example, you will need to take away any employer SG contributions from the cap to determine the remaining amount in the cap that you can then Salary Sacrifice. All concessional contributions will incur contributions tax.
For example, let’s assume that you are 45 years of age in the 2014/15 financial year and your salary (excluding SG contributions) is $100,000. Your Concessional Contribution cap (based on your age) is $30,000 for the year. Let’s also assume you are receiving standard compulsory SG contributions of 9.5% p.a. – equating to $9,500.
Because the SG contributions are also Concessional Contributions, it would count towards your cap of $25,000. This means that you would have $15,500 remaining, which is essentially your Salary Sacrifice Super Cap. This is the amount that you could salary sacrifice up to without exceeding the cap.
As you are an employee and presumably not ‘substantially self-employed’, you would be unable to make Self-Employed Contributions or Personal Concessional Contributions and therefore do not need to be concerned with these types of contributions counting towards your Salary Sacrifice Super Cap.
Use our Salary Sacrifice Calculator here.
Read more here about how salary sacrificing should be included when calculating your co-contribution entitlements from the Goverment.
What Happens if you Exceed the Concessional Contribution Cap?
Exceeding the Concessional Contribution cap through SG and/or Salary Sacrifice contributions may result in the excess being taxed at your marginal tax rate.