Constitutionally protected funds
Constitutionally protected funds (CPFs) are untaxed super funds that don't pay income tax on contributions or earnings they receive.
Some state governments operate CPFs for their employees (for example, West State Super and Gold State Super in Western Australia and Triple S in South Australia).
Under the Australian constitution, state government assets can't be taxed by the Commonwealth, so different arrangements apply to concessional contributions to CPFs.
Funds created for members of the judiciary are also often CPFs. Contact your super fund to find out if it is a CPF.
Contributions to a constitutionally protected fund
Concessional contributions
Effective 1 July 2017, contributions made (and certain other amounts allocated for interests) in CPFs and unfunded defined benefit funds will count towards your concessional contributions cap ($25,000 in 2017–18).
These contributions and amounts on their own cannot result in you exceeding your concessional contributions cap for a financial year, however; they will be used to assess your liability for Division 293 tax.
Counting CPF contributions towards your concessional contributions cap means that your ability to make further concessional contributions to other funds is limited. There may be tax consequences for your other concessional contributions.
Low-tax contributions
Low-tax contributions equal an individual's concessional contributions minus any excess concessional contributions. The concessional contributions counted for Division 293 tax purposes generally include:
- employer contributed amounts
- other family and friend contributions
- assessable foreign fund amounts
- assessable amounts transferred from reserves
- personal contributions for which you have been allowed a deduction
- defined benefit contributions.
These contributions are concessionally taxed at 15% within the super fund.
Example
Marcus is 38 years old and an employee of the state government. His total income for the financial year is $260,000.
Marcus has defined benefit contributions of $30,000 in the 2017–18 financial year to a CPF. Marcus also salary sacrifices $8,000 to another super fund which is not a CPF.
Marcus's concessional contributions cap amount for the 2017–18 financial year is $25,000.
The $30,000 concessional contribution to the CPF count towards Marcus's concessional contributions cap. Therefore, his concessional contributions for the financial year are $38,000.
This is more than his cap amount for the 2017–18 financial year and Marcus has to pay excess non-concessional contributions tax on $8,000.
Marcus’ income is $260,000, making it higher than the Division 293 threshold.
As a result, the concessional contributions that were not previously treated for excess ($30,000) will now be used to assess his liability for Division 293 tax.
Marcus will be issued with a Division 293 tax liability of $4,500 (15% of the $30,000 CPF contributions) which he will need to pay out of his Super account or by his own means.
End of exampleNon-concessional contributions
If you're a CPF member, non-concessional contributions are counted towards your non-concessional contributions cap.
Example
Marcus makes non-concessional contributions of $5,500 to his CPF for the 2009–10 financial year. He also contributes $450,000 in non-concessional contributions to his other super fund.
As Marcus is under 65 years old, he can 'bring forward' two years of contributions. This gives him a non-concessional contributions cap of $450,000 for the 2009–10 financial year.
The $5,500 non-concessional contribution along with the $450,000 counts towards his non-concessional contributions cap.
Therefore, he exceeds the cap by $5,500 and has to pay excess non-concessional contributions tax on $5,500.
End of exampleContributing to non-deductible funds
You cannot claim a deduction for personal super contributions made to certain types of funds.
These funds include:
- Commonwealth public sector superannuation schemes in which you have a defined benefit interest
- Constitutionally protected funds or other untaxed funds that would not include your contribution in its assessable income
- super funds that notified the Commissioner before the start of the income year that they elected to treat all member contributions to the:
- super fund as non-deductible, or
- defined benefit interest within the fund as non-deductible.
If you are unsure if you’re a member of one of these funds, contact your super fund. They will be able to advise you if they can accept deductible personal super contributions.
Alternatively, if you are a member of one of the above funds and wish to make personal contributions that are deductible, you may wish to open another super account.