Q: Could you please explain what the eligibility criteria is to contribute to Superannuation.
A: Your eligibility to contribute to superannuation is predominantly based upon four criteria; your age, your work status, your contribution and benefit limits.
Contributions can be made by an individual or a spouse or by an employer. The criteria and limits do vary depending on who is making the contribution.
Broadly speaking, if you are under age 67 and do not intend to claim a tax deduction, you are able to make personal contributions of up to $100,000 (Non-concessional) per financial year provided you Superannuation balance is less than $1.6 million at 30 June in the previous financial year.
If you were under age 65 at the beginning of the financial year, you can contribute up to $300,000 as a Non-concessional contribution if your total account balance is under $1.4 million at 30 June of the previous financial year and you have not previously triggered these bring forward provisions within the prior 3 year time frame. If your balance is between $1.4 million and $1.5 million, transitional contribution limits apply.
If you are aged 67 to 74, you are eligible to contribute to Superannuation provided you satisfy the work test; gainfully employed for at least 40 hours in a consecutive 30 day period during the financial year that you intend to make the contribution.
If you are over 65 and sell your home that you have owned for at least 10 years, you are eligible to make a downsizer contribution of up to $300,000 each as a non-concessional tax contribution to Superannuation regardless of your Superannuation balance. Contributions must be made within 90 days of the settlement of the property.
Employers are obliged to contribute 9.5% Superannuation Guarantee contribution (SGC) and any additional contributions required under an Industrial Award to an employee. SGC rates are due to increase from 1 July 2021 to 10% and will incrementally increase each financial year thereafter up to 12% from 1 July 2025. SGC obligations cease when the employee is age 75.
Employees under age 75, can make pre-tax salary sacrifice contributions or claim a tax deduction on personal contributions to Superannuation. Those over age 67 are required to meet the work test.
The limit for employer, salary sacrifice or personal deductible (Concessional) contributions to Super is $25,000 per financial year. However if your concessional contributions in a financial year are less than the Concessional contribution cap of $25,000, you can carry forward the unused cap amount for up to five financial years, where your total super balance is less than $500,000 as at 30 June in the previous financial year. You may use the accrued unused concessional contributions cap in addition to the current year’s cap. The commencement date for this carry forward was 1 July 2018.
Provided you meet contributions requirements, you may make concessional contributions to Super even if you Superannuation benefit balance is greater than $1.6 million.
Concessional contributions within the limits are taxed at 15% when received by the fund. Non-concessional contributions are not taxed by your fund provided they are within the limits. All contributions in excess of the applicable limits are taxed at penalty rates.
Subject to eligibility requirements, personal contributions to Superannuation may provide additional contribution and tax benefits such the Government co-contribution, spouse contribution tax offset and low income superannuation tax offsets.
Before making any contribution to Super, please check on the eligibility requirements and your contribution and benefit limits applicable.
Q: Could you please advise what the changes are in relation to making contributions to Superannuation from 1 July 2021.
A: From 1 July 2021, the concessional and non-concessional contribution caps are set to increase due to indexation for the first time since they were introduced in July 2017.
The Concessional contribution cap, originally set at $25,000, is indexed by average weekly ordinary time earnings (AWOTE) in increments of $2,500.
With the announcement of the AWOTE figure for the December 2020 quarter, the Concessional contribution cap is set to increase from $25,000 p.a. to $27,500 pa from 1 July 2021.
The Non-concessional cap in 2021–22 will see the standard cap increased from $100,000 to $110,000 from this date.
In addition, the maximum amount a member who was under 65 at the start of the year can contribute under the non-concessional contribution cap bring-forward rule is also set to increase from $300,000 to $330,000 from 1 July 2021.