Superannuation
Super contribution
A super contribution is money paid into a super fund for a person, either by an employer, by the individual or by someone else, and it is subject to caps and tax rules.
A super contribution is any payment into a person's superannuation account. It can be made by an employer, as in the super guarantee or salary sacrifice, by the individual from after-tax money, or by another person such as a spouse. The government may also contribute in some circumstances, such as co-contributions for low-income earners. All contributions are tracked by the fund and reported to the ATO.
For tax purposes, contributions are divided into two broad groups. Concessional contributions are those made from pre-tax income or for which a deduction is claimed, such as employer SG and salary sacrifice. They are generally taxed in the fund at a concessional rate. Non-concessional contributions are made from after-tax money and are generally not taxed again when they enter the fund. Each group has its own annual cap, and the caps change over time, so check ato.gov.au.
Exceeding a cap can have tax consequences. Excess concessional contributions are included in the individual's assessable income and taxed at their marginal rate, with an offset for the tax already paid by the fund. Excess non-concessional contributions may be released from the fund or taxed at a high rate. Some people can use unused caps from previous years in certain circumstances, but the conditions are specific and depend on the balance of the account.
Contributions must be made to a complying fund and be accepted under the fund's rules. Employers who pay SG must do so by the quarterly due dates, and timing for individual contributions matters, particularly near 30 June. A contribution is generally treated as made when the fund receives it. Individuals who want to claim a deduction for a personal contribution must lodge a notice of intent with the fund, and receive acknowledgement before lodging their return.
GST is not charged on super contributions, since they are not payments for a supply. The employer cannot claim GST credits for them. However, a self-employed person who makes personal contributions and claims a deduction does so in their income tax return, not in the BAS. Businesses with many employees often use a super clearing house to simplify payments to different funds.
A common mistake is to assume all contributions are treated the same. Another is to overlook the combined effect of employer SG and salary sacrifice on the concessional cap, especially for higher earners or those with several employers. People close to the cap should check their running total.
This is general information only, so check your own position with the ATO or a registered tax professional.
Worked example
Sophie earns $80,000 and her employer pays super guarantee, which is a concessional contribution. She also pays $5,000 from her own savings into her fund, which is a non-concessional contribution unless she lodges a notice of intent and claims a deduction. If she claims the $5,000 as a deduction, it reduces her taxable income by $5,000 and counts towards her concessional cap.
Practical tips
- Track your concessional contributions across all employers, since the cap applies to the total, not per job.
- If you want to claim a deduction for a personal contribution, lodge the notice of intent and wait for the fund to acknowledge it before you submit your return.
- Check the current caps on ato.gov.au each year, because they change.