Super contributions cap limit.
Contributing to your superannuation fund is one of the most cost effective ways to reduce ones income tax.
Generally speaking, there are two ways to contribute to ones superannuation fund:
1: Concessional contribution.
Concessional contributions are either paid from pretax dollars (i.e salary sacrifice, compulsory contributions) or from post tax dollars (such as personal contributions (which the member claims a tax deduction for so effectively being pretax dollars).
Concessional contributions are the most tax effective way to increase ones super account as the funds are taxed at 15% and are taxed in your super fund.
Concessional contributions are capped however and during the 15, 16 and 17 financial years, the cap is $30,000 p.a and up to $35,000 for members over the age of 49.
Should any member exceeding their cap (from 14 year on wards), the additional contributions will be included in the members assessed income and taxed at the members marginal tax rate (for clarification, please visit your local accountant South Yarra).
2: Non concessional contributions:
Non concessional contributions are made from post-tax income and effectively are not tax deducted. They are less tax effective than concessional contributions, however they are not limited by the same cabs as concessional contributions.
The non-concessional contributions cap for members over 65 (and under 75) is $180,000 for the 15, 16 and 17 financial years or $540,000 over a three year period for members under 65.
Any finds exceeding the non-concessional contributions cap are taxed at 47% (non-concessional contributions also include excess concessional contributions for the financial year).
Changes to the super contributions cap for the 2018 financial year will be as follows:
-Concessional contributions cap will be reduced to $25,000 for all members irrespective of age
-Non – concessional contributions cap will be reduced to $100,000 for member between the ages of 65 and 75.
-Members under the age of 65 (depending on their super balance) will have the option of contributing up the $300,000 over a three year period (see below for new contributions limit).
Total Superannuation Balance:
-Less than $1.4 million = Access to $300,000 cap (over 3 years)
-Greater than or = to $1.4 and less than $1.5 million Access to $200,000 cap (over 2 years)
-Greater than or = to $1.5 and less than $1.6 million Access to $100,000 cap (over 1 year)
-Greater than or = to $1.6 million Nil
For more information on any of the above, please visit your local accounting firm Melbourne.