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Contributions caps and taxation of contributions

There is generally no limit on the amount of contributions which can be made to superannuation. There are, however, limits on the amount of contributions which can be made and still receive concessional tax treatment. These limits are known as contributions caps. The current restrictions to contributing to super were put in place from 1 July 2007. There are two 'contributions caps' which restrict the amount that may be contributed to super by, or on behalf of, an individual within a financial year and once either of those limits is exceeded an individual may incur excessive tax.

Non-concessional contributions

Section: 5.5

Contributions for which a tax deduction is not available are called non-concessional contributions (NCCs).

A non-concessional contribution is generally a super contribution made to a complying super fund which is not included in the super fund's assessable income.

Contributions included in the non-concessional contributions cap 

Personal contributions for which no valid deduction notice is submitted and acknowledged; or where a valid deduction notice is submitted but a tax deduction is unable to be claimed or is denied.
Excess concessional contributions1.
Spouse contributions (counted toward receiving spouse's cap).
Contributions made on behalf of a child under age 18 by anyone other than the child's employer. (counted towards receiving child's cap).
100% of transfers of overseas pensions into Australian super funds within six months of Australian residency.
A portion of transfers of overseas pensions into Australian super funds after six months of Australian residency. The portion included is: (gross transfer - applicable fund earnings) (see section 10.5).
Proceeds from the sale of a small business that are contributed to super if the amount did not qualify for the 15-year or retirement CGT small business exemptions.
Contributions that are included in the assessable income of a fund but for which a tax deduction was disallowed by the ATO.
Any contributions made after 10 May 2006 to a fund while it was non-complying are counted to the member's non-concessional cap in the year the fund regains its complying status.
Non-assessable contributions allocated to a reserve, then allocated to the member's benefits in accordance within the timeframe specified in the SIS Regulations.
Example:

Rodney gives a notice to his fund indicating that he intends to claim his personal contribution of $10,000 as a tax deduction. This claim is later denied by the Tax Office as Rodney did not satisfy the '10% rule'. Rodney has not lodged a notice of variation, so his fund will treat his personal contribution as assessable income which will be taxed at 15%. However, these contributions will be counted towards Rodney's non-concessional contributions cap.

1. However, a client's non-concessional contributions for the financial year are reduced by the grossed up value of excess concessional contributions made from 1 July 2013 that they have elected to release from super.

Non-concessional cap exclusions
The following contributions are specifically excluded from the definition of non-concessional contributions.

Contributions excluded from the non-concessional contributions cap  

Government co-contributions.
Rollovers within the Australian super system.
Proceeds from the disposal of assets that qualify for the small business 15-year exemption or the $500,000 retirement exemption that are contributed to super are exempt from the non-concessional cap as long as they are counted towards, and don't exceed, the lifetime CGT cap of $1.355 million for 2014-15 (indexed and rounded down to the nearest $5,000) (see Chapter 8).
Contributions arising from structured settlements or orders for personal injuries
Contributions to constitutionally protected funds other than contributions included in the contributions segment.
An amount that a trustee of a public sector super scheme that came into operation before 5 September 2006, chooses to not be included in its assessable income.

Last modified: Monday, July 14, 2014