Concessional contributions are classified as contributions made into your super account where a tax deduction has been claimed by the contributor.
There is a maximum amount that can be contributed into your super account as concessional contributions each year, known as the concessional contributions cap.
Super Concessional Contributions Cap
The superannuation concessional contributions cap is assessed on a per person, per annum basis. The current cap amount is $25,000.
This means that the maximum that can be contributed into your super account as a concessional contribution each year is $25,000. However, there is a way you can contribute more, by carrying-forward your unused concessional contributions cap.
It is also important to keep in mind that there are age restrictions in making certain types of concessional contributions.
Unused Concessional Contributions Cap
You are permitted to carry-forward any part of your unused concessional contributions cap from the 2018/2019 financial year onwards.
Your unused amount for each financial year can be carried-forward for up to 5-years. However, you are only able to utilise the unused carried-forward cap amount in a financial year if your total super balance was below $500,000 on 30 June of the previous financial year.
After 5-years of carrying-forward an unused amount, that unused amount will expire and no longer be able to be utilised.
For example, if your super account received total concessional contributions of $20,000 in the 2019/20 financial year, you would be able to carry-forward the unused $5,000 until the 2024/25 financial year and could add this $5,000 to the standard $25,000 cap in any financial year up until that point. However, you can only utilise this carried-forward amount in a financial year where your super balance on 30 June of the previous financial year was below $500,000 (includes all super balances and pension balances in your name).
You do not need to do anything to carry-forward unused concessional contributions caps. The unused amount will automatically be recorded by the ATO and can be viewed on your MyGov account.
If you are unsure of your carry-forward unused contributions cap, you should speak with your accountant or login to your MyGov account.
Excess Concessional Contributions
What happens if you do a whoopsie and contribute more than your concessional contributions cap in a financial year? Well, in this instance, the excess amount (and only the excess amount) will be added and taxed at your personal income tax rate, minus a 15% offset for contributions tax already paid on this amount.
You may also be required to pay an excess concessional contributions charge (ECCC) for having too much invested in superannuation’s concessionally-taxed environment.
You will have the option to withdraw the excess amount from super. If you decide not to withdraw the excess, the excess amount will count towards your non-concessional contribution cap.
If you exceed the concessional contributions cap, you do not need to do anything. You will receive a notice from the Australian Tax Office (ATO) which will outline your options.
Types of Super Concessional Contributions
The types of contributions that count towards the concessional contributions cap include mandatory employer superannuation guarantee (SG) contributions, salary sacrifice contributions and personal concessional contributions.
All of these types of contributions will count towards the same $25,000 contribution cap.
Also, remember, your concessional contributions are assessed on a per person basis, not per super account. So, you cannot contribute $25,000 to one super account and then $25,000 to another in the same financial year. The same concessional contributions cap applies across all of your super accounts.
Am I Eligible To Make Concessional Contributions?
A person of any age is eligible to receive mandatory employer SG contributions.
Any person under age 67, is eligible to make salary sacrifice or personal concessional contributions to super.
A person aged between 67 and 74 is able to make salary sacrifice or personal concessional contributions to super, provided they have met the superannuation work test – working at least 40 hours over a 30-consecutive day period in the financial year that the contribution is made and prior to the contribution being made.
If you make a personal concessional contribution, you will need to notify your super fund of your intention to claim a tax deduction for the contribution, prior to completing your tax return for the relevant financial year and prior to rolling over your super or starting a pension; otherwise the contribution will be classified as a non-concessional contribution and you will be unable to claim a personal tax deduction.
Can I Contribute More Than $25,000 Into Super?
The general concessional contributions cap is $25,000 per person, per financial year. You can only contribute more than this as a concessional contribution using any carried-forward unused amounts.
You may also have the ability to make non-concessional contributions to super. The general non-concessional contribution cap is $100,000 per person, per financial year. However, certain age and balance restrictions do apply. You will need to check your eligibility prior to making any non-concessional contributions.
Other types of super contributions that do not count towards the concessional or non-concessional contributions caps include the Home Downsizer Contribution, the CGT Small Business Retirement Exemption Contribution and the Personal Injury Payment Contribution.