The Government restricts the amount of money you can contribute to your super account at concessional tax rates – and there are tax implications once your contributions reach these limits.
What are concessional contributions?
Concessional contributions are those for which a tax deduction is claimed and therefore are generally subject to 15% contribution tax (or 30% if your taxable income plus additional components are over $250,000) on receipt by AvSuper. They include salary sacrifice contributions, employer contributions and personal deductible contributions*.
While these contributions may be transferred to your spouse under a contribution splitting arrangement, they will still count against your contribution limit (and additional high income earners tax or Division 293 tax).
*Since 1 July 2017, most Australians are able to claim a tax deduction, giving greater flexibility between regular salary sacrifice payments and ad hoc personal contributions.
What are non-concessional contributions?
Non-concessional contributions are those which are not subject to contributions tax when paid to AvSuper. These are generally contributions which you make from your after-tax income and any contributions made by a spouse (“spouse contributions”) on your behalf.
What are the contribution ‘limits’?
For the 2023-24 financial year, the limit on concessional contributions is $27,500, regardless of age.
In general, the limit on non-concessional contributions is $110,000 for the 2023-24 financial year, subject to eligibility rules. You can use a ‘bring forward’ option of contributing up to $330,000 over 3 years (e.g. you could make non-concessional contributions of $330,000 in 2021-22 but you could not make further non-concessional contributions until 2024-25 without paying additional tax) but only applies if you had a total super balance under $1.48 million on the previous 30 June.
Contributions above these limits will attract additional tax as detailed below. Special rules are in place for members with a ‘Defined Benefit’ as outlined below.
If you are at risk of exceeding your concessional contributions limit and have more than one employer, you may be eligible for a partial SG opt out – please see our partial SG opt out fact sheet for full details.
What is the process for assessing whether I have exceeded the contribution limits?
By the end of October each year, all super funds must report to the ATO the contributions received for members in the previous financial year.
Funded defined benefit funds are also required to calculate members’ notional taxed contributions and include these in the report.
The ATO assesses the contributions reported for each person against the prescribed limits and determines if additional tax is payable.
What if I exceed the contribution limits?
If you exceed the concessional contribution limit, the ATO will give you the opportunity to withdraw up to 85% of the excess to pay off a tax bill. The excess amount will be included in your assessable income and taxed at your marginal rate (less 15% tax offset for contributions tax already paid). Understanding the full impact of excess concessional contributions is not easy – please contact us if you would like assistance.
If you exceed the non-concessional contributions limit, you will be taxed an additional 45% (plus Medicare levy if applicable) on the excess (ie only on the amount contributed above the limit). You can choose to have the excess amount released from your super. However, your annual income tax return will need to include that amount and an associated earnings amount. Again, this is not a simple calculation to understand so please contact one of our financial planners if you would like assistance.
How do I pay the additional tax?
You will receive a notice of excess contributions tax assessment from the ATO and the tax levied must be paid within 21 days. The ATO will issue you with a release authority for each limit you exceed.
If you have exceeded the concessional contributions limit, you can present the ATO release authority to your super fund and ask them to release funds from an accumulation (but not a defined benefit) account to pay the additional tax. Alternatively, you can pay the tax yourself directly to the ATO.
If you have exceeded your non-concessional contributions limit, you must provide the release authority to the fund within 21 days of receipt so that the additional tax can be deducted from your accumulation account. A general interest charge (GIC), currently 8% p.a. may apply if the tax liability is not paid by the due date.
Provision exists to appeal against these assessments, although claims generally have to be made within four years.
Thinking of adjusting your concessional contributions?
Before you do, you may wish to consider the following and/or seek professional financial advice, including from one of our financial planners:
- contribution limits apply to an entire financial year, so if you adjust your contributions during a year, the ATO considers the total paid rather than specific contributions
- what will you do with the money you are no longer contributing to super? It will be taxed at your marginal rate, as will any earnings you get by investing that money outside of super. Additionally, you won’t get the benefit of compound earnings on your retirement savings which may be greater than any additional tax liabilities.
- your employment arrangements and Superannuation Guarantee legislation may prevent a contribution reduction
- contributions count in the financial year we receive the money, regardless of when it was deducted from your pay
- there are no AvSuper fees to make contributions or adjust your contribution rates
Defined Benefit Members (AvSuper Corporate Members only)
As a defined benefit member, how do you determine my employer’s contribution?
In AvSuper’s defined benefit division, contributions made by you and your employer are not credited to your account but are paid into the Fund’s asset pool from which your benefit is paid when it comes due. An actuary reviews AvSuper’s financial position regularly to ensure the asset pool remains adequate to meet members’ accrued benefits. Employer contributions may be increased or decreased depending on the actuary’s findings.
Your benefit is calculated by a formula prescribed in AvSuper’s Trust Deed and your accrued benefit is not dependant on the actual payments being made by your employer.
It is not possible to determine an employer’s contribution for the concessional contributions limit in the same way as for an accumulation account where employer contributions are actually credited to each member’s account. Therefore, a different method applies for valuing employer contributions to defined benefits schemes.
How do I estimate my defined benefit contributions for the concessional limit?
Table 1 below details the percentage of your superannuation salary that will count towards your concessional contributions limit each financial year. The superannuation salary used is specified by Airservices Australia or CASA on your birthday prior to 1 July each year, i.e. the calculations for the 2022-23 financial year will be based on the superannuation salary determined on your birthday between 1 July 2022 and 30 June 2023.
If you have changed or intend to change your contribution rate during the financial year, take this into account when you do your estimate.
If you are contributing to your defined benefit account via salary sacrifice, your contribution will be included in the calculation. If you are contributing from after tax dollars, your contribution is calculated at a different rate, as shown in table 1.
If you take leave without pay for which you do not accrue superannuation, allowance will be made for this.
If you are a CSS AvSuper Defined Benefit Member, 1.2% of your Superannuation Salary will count towards the concessional contribution limit.
I have done the defined benefit calculation and I am already over the concessional contribution limit
Currently, ‘grandfathering’ provisions state that if your notional taxed defined benefit contributions exceed the relevant limit, you will be considered to be equal to the limit, i.e. you will not be subject to the increased tax on the excess.
These provisions apply for members with defined benefits at 12 May 2009.
However, any other concessional contributions you may have in the relevant financial year may be subject to additional tax as they are not protected by the grandfathering arrangements. For instance, any salary sacrifice contributions or additional contributions from your current or secondary employer made to your AvSuper accumulation account will be reported to the ATO and will count as excess contributions.
The ‘grandfathering’ provisions won’t apply if:
- You increase or have increased your contribution rate after 12 May 2009 (unless the increase was a salary sacrifice change from 6% to 7%)
- AvSuper’s rules change to increase the benefit or improve the superannuation salary calculation method after 12 May 2009
- Your superannuation salary increased after 12 May 2009 by more than 50% over 1 year or 75% over 3 years, and your employer is unable to certify that the increase was on an arm’s length basis. We are required to report any of these salary increases to the ATO even if the employer’s certification is received.
- The AvSuper Trustee or your employer exercises discretion to pay a greater benefit than provided for in AvSuper’s rules.
Table 1: AvSuper (Full) Defined Benefit Member
|Selected Contribution Rate (%)
||Percentage of superannuation salary which counts towards concessional limits
|Member contribution made by salary sacrifice
||Member contribution made from after tax dollars
Need help understanding your contribution limits and their impact on your retirement savings goals?
Our Member Advice Consultants offer personalised advice, including assistance in calculating your contribution limits and associated tax liabilities.
Call 1300 128 751 today for an appointment.
Email: firstname.lastname@example.org | Local call: 1300 128 751 | Phone: 02 6109 6888 | www.avsuper.com.au
This information is of a general nature only and does not take into account your personal objectives, situation or needs. Before making a decision about AvSuper, you should consider your own requirements and the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD). For a copy call us or visit the AvSuper website, www.avsuper.com.au. AvSuper Pty Ltd (ABN 46 050 431 797, AFSL 239078) is the Trustee of the AvSuper Fund (ABN 84 421 446 069). FS3000.5 02.2021