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Contributions caps and taxation of contributions

Constitutionally protected funds (CPFs) - concessional contributions

Section: 5.5

CPFs are untaxed super funds that do not pay income tax on contributions or earnings they receive. CPFs are operated by some state governments in Australia for their employees. Under the Australian Constitution, State governments cannot be taxed, so different arrangements apply to concessional contributions. Funds created for members of the judiciary are also often CPFs.

Prior to 1 July 2017, contributions that would have normally been included in an individual's concessional contributions cap, if made to a taxed fund, did not count towards an individual's concessional contributions cap if they were made to a CPF.

From 1 July 2017, contributions that are made, or allocated to, a CPF on or after 1 July 2017 are counted toward an individual's concessional contributions cap. However, these contributions and amounts, on their own, cannot result in excess concessional contributions.

Example:  Modified from Example 1 in LCR 2016/11

Jamie has an interest in a CPF that is not a defined benefit interest. During the 2019-20 financial year, Jamie's employer contributes $30,000 to the CPF for Jamie. This contribution exceeds Jamie's $25,000 concessional contribution cap, but because the contribution has been made to a CPF, Jamie's total concessional contributions are taken to be $25,000 for 2019-20; that is, he is not subject to excess concessional contributions tax.

In contrast, if Jamie also salary sacrificed $20,000 to another superannuation fund, which is not a CPF, in 2019-20, Jamie's total concessional contributions would be $50,000. As the amount of concessional contributions in relation to Jamie's interest in CPFs ($30,000) cannot create an excess, and is greater than Jamie's concessional contributions cap, the amount of those concessional contributions is taken to be equal to his concessional contributions cap. Therefore, Jamie has excess concessional contributions of $20,000 for the 2019-20 financial year.

Last modified: Tuesday, July 23, 2019