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  • Types of non-concessional contributions

    There are many types of non-concessional contributions including:

    Some types of contributions may not be able to be accepted by your super fund, depending on your age and work status (see Acceptance of member contributions and work test).

    Exclusions

    The following types of contributions do not count towards your non-concessional contributions cap:

    These types of contributions are only excluded if you meet all the conditions. You must specifically ask your fund to exclude them, by providing your fund with a relevant form before or when you make a contribution.

    Government co-contributions are also not counted as non-concessional contributions. You do not have to take any action for these to be excluded.

    Individuals with a defined benefit interest

    If you’re a member of a defined benefit fund, you are usually required to make contributions which impact your defined benefit interest. These will generally count towards your non-concessional contributions cap, even if your employer made the contributions on your behalf.

    If you are uncertain about which contributions are non-concessional, you should contact your fund.

    You may still have to make compulsory non-concessional contributions under an industrial or other workplace agreement, even if your non-concessional contributions cap is nil (because your total super balance is greater than or equal to the general transfer balance cap at 30 June of the previous financial year). In this scenario, these contributions:

    • will be excess non-concessional contributions
    • may not be able to be released, depending on the rules of your fund.

    If your total super balance is less than the general transfer balance cap these compulsory contributions will:

    • not necessarily mean you will exceed your non-concessional cap
    • may limit your ability to make other non-concessional contributions without having to pay extra tax

    If you have excess contributions that cannot be released from any of your super funds you will be assessed for excess non-concessional contributions tax. You will need to pay this from your own money.

    As defined benefit funds can have different rules, you will need to contact your fund to understand your options.

    You may be able to avoid exceeding your non-concessional contributions cap by:

    • stopping your contributions
    • reducing your contribution rate
    • making contributions under a salary sacrifice arrangement so they become concessional contributions. This will need your employer's approval.

    You will need to carefully consider the impact of reducing these contributions to nil or below certain thresholds as advised by your fund, as this may impact your:

    • defined benefit
    • other benefits offered by your fund, such as insurance.

    You will also need to carefully consider the consequences of making these contributions as salary sacrifice contributions as they may result in you exceeding your concessional contributions cap.

    See also:

    Example: Excess non-concessional contributions and defined benefit funds

    Chris' total super balance at 30 June 2019 is $1.65 million. This reduces his non-concessional contributions cap for 2019–20 to nil.

    However, Chris is a member of a defined benefit fund and it is mandatory for him to make non-concessional contributions to his super fund during 2019–20. As Chris has a nil non-concessional contributions cap, all the mandatory contributions will be excess non-concessional contributions.

    We receive:

    • Chris' individual tax return on 25 September 2020
    • his fund's annual contribution reporting on 30 October 2020.

    We issue Chris with an excess non-concessional contribution determination.

    Chris makes an election to release the excess amount from his only fund. However, Chris' fund does not release the amount because he is a member of a defined benefit fund and his fund does not have to action the release authority.

    We:

    • notify Chris that the excess could not be released
    • issue an excess non-concessional contributions tax assessment.

    Chris now has 21 days to pay this liability from his own sources.

    End of example

    Example: Excess concessional and excess non-concessional contributions and defined benefit funds

    Andrew is a member of a defined benefit fund. His employer makes contributions on his behalf. These contributions are normally non-concessional contributions however, Andrew has arranged for these contributions to be salary sacrificed as concessional contributions.

    During 2017–18, Andrew's concessional contributions exceed his cap by $5,000. Andrew receives an excess concessional contributions determination but does nothing. He leaves his excess concessional contributions in super.

    Andrew is subject to the top marginal tax rate in 2017–18. Therefore, his excess concessional contributions are taxed at 47% (including the Medicare levy). Andrew receives an offset of 15% for the concessional contributions tax.

    Because Andrew's total super balance at 30 June 2017 was greater than $1.6 million his non-concessional contributions cap for 2017–18 is nil. This means Andrew's excess concessional contributions are also excess non-concessional contributions.

    Andrew can't release the excess non-concessional contributions amount because he is a member of a defined benefit fund. Therefore, Andrew must pay excess non-concessional contributions tax of 47%. This is in addition to the 47% income tax paid on the same contributions when they were excess concessional contributions. This means 94% tax has been paid on these contributions.

    In this case, Andrew's decision to enter into a salary sacrifice arrangement for his compulsory employer contributions resulted in the contributions being taxed at 94%. If Andrew had not made this arrangement, the same contributions would have been taxed as excess non-concessional contributions only at 47%.

    This example shows why it is important to carefully consider how you make extra super contributions.

    End of example

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      Last modified: 27 Apr 2021QC 19749