Tax on Superannuation Contributions are determined by the type of contribution being made.
The two type of superannuation contributions are ‘Non Concessional’ contributions and ‘Concessional’ contributions.
A Non Concessional contribution is a contribution made with after-tax dollars where a tax deduction has not been claimed.
A Concessional Contribution is a contribution made where a tax deduction has been claimed. Concessional Contributions include SG Levy Contributions, Salary Sacrifice Contributions and Self Employed Contributions. Concessional Contributions that are not Excess Concessional Contributions are referred to as Low Tax Super Contributions.
Tax on Superannuation Contributions – Non Concessional Contributions
Non Concessional Contributions do not incur any tax upon entering your superannuation fund.
There will however be tax on superannuation earnings. Read more about this here.
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You may also receive a tax free super co-contribution.
Tax on Superannuation Contributions – Concessional Contributions
Concessional Contributions on the other hand will incur Contributions Tax.
The current Contributions Tax rate is 15%.
Therefore your contribution amount will be reduced by 15% prior to being allocated to your member account.
So, if you make total salary sacrifice contributions of $10,000 throughout the year, $1,500 in Contributions Tax will be deducted and the remaining $8,500 will be paid into your account.
If you have a SMSF, the Contributions is not required to be paid until the SMSF lodges it’s tax return.
Low Income Earner Refund
Under new legislation, Low Income Earners are eligible to receive the Low Income Superannuation Contribution until 30 June 2017. Read more here.
Contributions Tax Doubled for High Income Earners
For those earning more than $300,000 p.a., the Concessional Contributions Tax is 30%
Excess Contributions Tax – Non Concessional
If you make Non Concessional Contributions in excess of the Non Concessional Contribution Cap, you will incur Excess Contributions Tax at the highest marginal tax rate.
Excess Contributions Tax – Concessional
If you make Concessional Contributions in excess of the Concessional Contribution Cap, the excess amount will be taxed at your marginal tax rate.
Remember that you will need to satisfy the Superannuation Work Test if you are over the age of 65 and wish to make any type of personal contribution. Read more about the Superannuation Work Test here.