Getting money into super
The Superannuation Industry (Supervision) Regulations (SIS) eligibility rules define contributions as either employer or member contributions, unlike the tax rules, which define contributions as either concessional or non-concessional.
Member contributions are contributions by, or on behalf of, the member to the fund but do not include employer contributions ( eg personal contributions, child contributions made by a parent, spouse contributions).
A personal contribution is a member contribution made by the member. A personal contribution may be either concessional, where the member claims a tax deduction (if eligible), or non-concessional, where the member does not claim a tax deduction for the contribution (see section 2.1 for claiming tax deductions for personal super contributions). Personal contributions may be made up to and including 28 days after the end of the month in which the individual reaches age 75, subject to the work test if aged 65 or over.
Only member contributions made by the member (personal contributions) may be tax deductible.
Member contributions made by others
Member contributions that are not made by a member include, for example, spouse contributions, child contributions made by a parent and Government co-contributions. Member contributions made by others may be made up to and including age 69, subject to the work test if the member is aged 65 or over.
Member contributions made by anyone other than the member are not tax deductible to the member or the contributor. For example, spouse contributions are not tax deductible for the member or the contributor.
Member contributions made by a person directly to their spouse's superannuation account are known as spouse contributions. At the time of the spouse contribution, the receiving spouse must be:
- under age 65, or
- aged 65 to 69 and have satisfied the work test.
Spouse contributions cannot be made once the receiving spouse is aged 70 or over.
The individual making the spouse contribution can be any age and does not need to satisfy the work test.
Spouse contributions may allow the contributing spouse to claim a tax offset of up to $540. In addition, spouse contributions:
- count toward the receiving spouse's non-concessional contributions cap.
- do not qualify the receiving spouse for a Government co-contribution.
- are not tax deductible to either the receiving or contributing spouse.
Child super contributions
Anyone under age 65, including children (ie under age 18), can contribute to super without meeting a work test. A child, their parents, a child's employer, or anyone else may contribute to a child's superannuation account on the child's behalf.
Children are subject to the same contributions caps and preservation rules as adults. Children have some special treatment upon receipt of death benefits paid from superannuation.
See section, Tax deductions for contributions to a child's super, for the tax status and deductibility of contributions made to superannuation for children.
Fund-capped contribution rules ceased on 1 July 2017. Prior to 1 July 2017 some member contributions had been classified as fund-capped contributions and if a single fund-capped contribution exceeded a member's fund cap the excess had to be refunded.
|2017 Federal Budget proposal: Contributing proceeds from sale of home
Effective 1 July 2018
From 1 July 2018, individuals aged 65 and over will be able to contribute up to$300,000 into super from the proceeds of the sale of their principal place of residence. This measure will apply to a principal place of residence held for a minimum of 10 years.
These contributions will be treated as non-concessional contributions and will be in addition to any other voluntary contributions that people are able to make under the existing contribution rules and concessional and non-concessional caps.
The existing contribution restrictions for people over age 65 and the restrictions on making non-concessional contributions where a person's total superannuation balance is over $1.6M will not apply. However, these contributions will not be exempt from the transfer balance cap and will only be able to be used to commence a retirement phase pension where the member has remaining transfer balance cap space. The amount contributed will also be fully assessable under the Age Pension assets test.
While this proposal could allow an eligible couple to contribute up to an additional $600,000 to super over and above their existing concessional and non-concessional caps, it is likely to be more attractive for clients who are income tested or who are not receiving a means tested pension. For assets tested part pensioners, they would need to earn an after tax return of at least 7.8% on the amount contributed to break even.
At the time of writing this proposal is not yet law.
Last modified: Monday, January 8, 2018