Understanding contributions

We all want to retire with as much money as possible, but there are limits on how much we can contribute into our superannuation funds, and if we exceed them, it can be painful.

Being aware of what’s counted can make contributing to super pain-free. These limits, known as ‘contributions caps’, are as follows: tax on the excess contributions at the taxpayer’s marginal tax rate less a 15 percent offset for the contributions tax already paid.

• The excess concessional contributions are added to non-concessional contributions to be counted towards those caps.

Fund members breaching the caps will have the option of receiving a refund of excess contributions, which will be taxed as normal income. This option will only be available in the first year of breach. For non-concessional contributions – • Excess concessional contributions are added to non-concessional contributions to determine if the $100,000 cap has been breached. If it has, the $300,000 three-year cap is triggered. This means that no more than $300,000 can be contributed over the three-year period from the beginning of the financial year in which the original contributions are made.

Contributions in excess of $300,000 over three years must be withdrawn from the super fund and any income earned on those contributions will be taxed as income at the taxpayer’s marginal rate of tax.

Be aware that if you are assessed to have exceeded your contributions your assessment is accompanied by a compulsory release authority, which requires the fund to release sufficient money to pay the tax.

Speak to your licensed financial planner about your superannuation and make sure you are staying within your limits.