A contribution is when you or your employer add money to your superannuation
There are 2 types of super contributions. Concessional and Non-concessional.
Concessional contributions are taxed at 15%. This relates to the first $25,000 contributed to your super each year via…
- compulsory employer contributions,
- salary sacrifice, or
- voluntary contributions.
It is important to understand that with an SMSF you need to pay the 15% contributions tax on your employer contributions made throughout the year. You still pay this in a retail fund but you do not notice it. The benefit of an SMSF is that you get to invest that 15% throughout the year before paying it back at tax time.
After you have added over $25,000 to your super in one year, contributions are classified as non-concessional and are taxed at your personal marginal tax rate.
However, if you earn over $250,000, for every dollar over $250,000 your employer contributions are taxed at 30%. Bear in mind that legally your employer’s mandatory contributions stop at $25,000, so any employer paid super over $25,000 per year needs to be negotiated with your employer.
On top of the $25,000 concessional contributions, you can contribute an additional $100,000 per year in non-concessional contributions. These non-concessional contributions are paid into your super with after tax dollars. So you need to have already paid tax on this money personally.
If you are under 65 years old, you can bring forward 2 years worth of the $100,000. This means you can contribute $300,000 one year and $0 for the following 2 years.
If you have contributed over the non-concessional limit and don’t withdraw the funds, the excess is taxed at 47%.
If you are over 65 years old and want to make non-concessional contributions, you need to prove you are working 40 hours a week in 30 days of the year.
You can read the ATO’s guidelines on contributions to your super here: https://www.ato.gov.au/Rates/Key-superannuation-rates-and-thresholds/?page=2#Contributions_caps