23 July 2019
by David Prichard and Shae Rasmussen
- Related topics
The start of the new financial year is often a time where we review our overall financial strategy and set new goals. For many of us, superannuation savings play a significant role when it comes to formulating our financial strategy. Therefore, it is vital for you to be aware of the relevant thresholds and rates as it allows you to effectively plan your strategy without being in breach of the thresholds.
The key contribution thresholds and tax rates are as follows:
|Concessional Contributions Cap||$25,000|
|Tax rate on Concessional Contributions up to cap||15%|
|Non-Concessional Contributions Cap||$100,000|
|Tax rate on Non-Concessional Contributions up to cap||Nil|
|Division 293 tax threshold||$250,000|
|Division 293 tax rate||15%|
Since 1 July 2017, the maximum amount per annum that can be contributed to superannuation under the Concessional Contributions Cap is $25,000 for everyone. Prior concessional caps for those over 49 years old ceased at that date.
This means that from this date, except in limited circumstances, the maximum that can be contributed to super including salary sacrificed amounts and the 9.5% employer super is $25,000 in a tax effective manner.
It should be noted that those with low superannuation balances (i.e. less than $500,000) are able to carry forward any unused cap for five years, such that if you do not contribute up to the full contribution cap for a year (up to five years) you may be able to contribute the unused cap in a salary sacrifice or personal deductible superannuation contribution in later years. It should also be noted that these contributions can only be made for unused caps from 1 July 2018 and onwards (i.e. the year ended 30 June 2020 is the first year where any such carry-forward contribution may be made).
Non-Concessional Contributions are those contributions made from after tax funds for which no tax deduction is claimed. The threshold for the 2020 financial year remains at $100,000 per year and is only available to those with combined superannuation balances of less than $1.6 million at the end of the previous financial year.
Previous concessions that were available to “bring forward” non-concessional contributions for three years are still in place, however are now dependent on age and the superannuation balance at 30 June of the previous tax year.
Division 293 Tax Threshold
Division 293 tax is levied at 15% of the concessional contributions made up to the contributions cap amount, where the member earns more than $250,000 per year. This threshold was previously $300,000.
It is important to be mindful of these rates and thresholds as exceeding them can lead to penalties being applied by the ATO, which ultimately effects your superannuation balances.
To discuss how these thresholds may impact your personal circumstances please do not hesitate to contact your ESV Engagement Partner on 02 9283 1666.