Understanding Super Caps and Concessions
If you're looking to grow your superannuation, you may be considering making a Personal Super Contribution (PSC). This is where you directly contribute an amount into your super fund. This doesn't include contributions made through a salary-sacrificing arrangement.
Claiming Personal Super Contributions
These contributions can be claimed as a deduction in your tax return, and doing so makes them 'concessional contributions'. This means it is taken from your pre-tax income and taxed through your super fund at a rate of 15%. If these contributions are not claimed as a deduction, they are 'non-concessional contributions'. This means the amount is taken from your after-tax income and not further taxed.
In order to claim your PSC as a deduction, you will need to notify your super fund by sending them a Notice of Intent to Claim form (NOI). Your contribution will need to be made in the previous financial year, and your form will need to be sent and acknowledged before the end of the following year. For example, to claim a PSC deduction in your 2024 income tax return, you need to have made your contribution between 1 July 2023 and 30 June 2024. To be able to successfully claim this deduction, you will need to lodge your completed NOI with your superfund prior to 30 June 2025.
Concessional Contribution Caps
When considering making a PSC into your super, it is important to note that there are caps in place regarding concessional contributions. This essentially limits the amount that can be claimed as concessional and taxed at 15%. From 1 July 2021 to 30 June 2024, the cap for each year was $27,500. From 1 July 2024, the concessional contributions cap is $30,000. Amounts that exceed these caps cannot be claimed as a tax deduction.
Carrying Forward Unused Caps
If you have unused amounts from the concessional caps from previous years, you may be able to roll these amounts forward to increase how much you can claim as a deduction. In order to be eligible to carry forward amounts, you must
(a) have a super balance of less than $500,000 at the end of the previous financial year and
(b) have unused cap amounts from the previous 5 years. Unused cap amounts expire and cannot be used after 5 years. These unused amounts are applied automatically when you exceed the cap in any year.
Division 293 Tax
When your income combined with your concessional PSC exceeds $250,000 in the tax year, you will be liable to additional Division 293 tax. Division 293 tax is charged at 15% of the excess over the threshold or the taxable super contributions, whichever amount is less. If you are liable to pay this additional tax, the ATO will send you a Division 293 Notice after they have received your income tax return and contribution information. This amount can be paid either with your own funds or by electing to release money from your super fund.
For more details on contributions and to see if you fit the eligibility criteria, visit the ATO website.