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Subject: Concessional and non concessional contributions caps
Question:
Are contributions which were transferred to your account with your superannuation fund part of your concessional contributions cap?
Advice
This advice applies for the following period:
2010-11 income year
The arrangement commences on:
1 July 2010
Relevant facts and circumstances
Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice.
You are a member of a complying superannuation fund (the Fund).
In the 2010-11 income year you were advised that some superannuation contributions (the contributions) were transferred to your account with the Fund.
You state that as a result of an enquiry made with your Employer the contributions represent an adjustment of superannuation contributions relating to work you performed for the Employer in previous income years.
You intended to make additional personal superannuation contributions to the Fund in the 2010-11 income year.
You are over 50 years of age.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 292-20(2)
Income Tax Assessment Act 1997 Section 290-150
Income Tax Assessment Act 1997 Subsection 290-150(2)
Income Tax Assessment Act 1997 Section 290-155
Income Tax Assessment Act 1997 Section 290-160
Income Tax Assessment Act 1997 Section 290-165
Income Tax Assessment Act 1997 Section 290-170
Income Tax Assessment Act 1997 Subsection 292-85
Income Tax (Transitional Provisions) Act 1997 Subsection 290-20(2)
Superannuation (Excess Concessional Contributions Tax) Act 2007 Section 4
Superannuation (Excess Concessional Contributions Tax) Act 2007 Section 5
Reasons for decision
Summary
The contribution made to your superannuation fund in the 2010-11 income year forms part of your $50,000 concessional contributions cap for that income year.
Detailed reasoning
Limits on concessional contributions
Concessional contributions made to superannuation funds are subject to an annual cap. For each of the 2010-11 and 2011-12 income years the annual cap is $25,000.
The concessional contributions cap is indexed to upward movements of average weekly ordinary time earnings (AWOTE) in $5,000 increments (subsection 292-20(2) of the ITAA 1997).
Concessional contributions include:
· employer contributions;
· salary sacrifice contributions; and
· personal contributions claimed as a tax deduction.
Deductions for personal contributions, which are usually claimed by self-employed persons, require the person claiming the deduction, in the relevant income year, to satisfy all of the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997.
Further, it should also be noted, as a result subsection 290-160(2) of the ITAA 1997, employees are not entitled to claim a deduction for personal superannuation contributions if the total of their assessable income and reportable fringe benefits attributable to duties as an employee exceeds ten percent of their total assessable income and reportable fringe benefits for the relevant income year.
In relation to amounts excluded from being concessional contributions they are:
· so much of an amount that is transferred to a superannuation fund from a foreign superannuation fund and is included in the assessable income of the fund as a result of a choice made under section 305-80 of the ITAA 1997;
· an amount that is a roll-over superannuation benefit to the extent that it contains an untaxed element that is not an excess untaxed roll-over amount; and
· a contribution made to a constitutionally protected fund.
If a person has more than one superannuation fund, all concessional contributions made to all their funds are added together and count towards the cap.
It should be noted that between 1 July 2007 and 30 June 2012, a transitional concessional contributions cap applies for people aged 50 or over. For each of the 2010-11 and 2011-12 income years the annual cap is $50,000 (subsection 292-20(2) of the Income Tax (Transitional Provisions) Act 1997).
A person will be taxed on concessional contributions over the cap at a rate of 31.5% (section 292-15 of the ITAA 1997 and sections 4 and 5 of the Superannuation (Excess Concessional Contributions Tax) Act 2007).
Amounts in excess of the concessional contributions cap are also counted towards the non-concessional contributions cap.
In your case, the facts provided show that during the 2010-11 income year the contributions, which represent unpaid superannuation contributions relating to previous income years, were transferred to your superannuation fund (the Fund).
As the contributions are amounts which your Employer was required to make on your behalf in previous years to your Fund, and they are not the types of amounts which are excluded from being concessional contributions, these contributions are concessional contributions which were made in the 2010-11 income year.
Accordingly, the contributions form part of your concessional contributions cap for the 2010-11 income year.
As you were over 50 years of age in the 2010-11 income year, your annual concessional contribution cap was $50,000. Therefore, provided the balance of your concessional contributions in the 2010-11 income year did not exceed the cap less the contributions, your concessional cap for that income year will not be exceeded.
Limits on non-concessional contributions
Non-concessional contributions made by a person to a complying superannuation fund are subject to an annual cap (subsection 292-85(2) of the ITAA 1997). For the 2009-10 income year onwards the annual cap is always six times the concessional contributions cap. Therefore, for each of the 2010-11 and 2011-12 income years the annual cap is $150,000.
Non-concessional contributions include (among others):
· personal contributions for which an income tax deduction is not claimed; and
· contributions a person's spouse makes to the person's superannuation fund account (spouse contributions).
A person will be taxed on non-concessional contributions over the cap at the rate of 46.5% (section 292-80 of the ITAA 1997 and sections 4 and 5 of the Superannuation (Excess Non-concessional Contributions Tax) Act 2007). The person will be required to ask their superannuation fund to release an amount that is equal to the tax liability (section 292-410 of the ITAA 1997).
As noted earlier, any concessional contributions in excess of the concessional contributions cap for the relevant income year will also be counted towards the non-concessional contributions cap.
Therefore, your non-concessional contributions cap for the 2010-11 income year was $150,000.
The bring-forward provision
As a concession, to accommodate larger contributions, persons under age 65 in a financial year are able to 'bring forward' future entitlements to up to two years worth of non-concessional contributions. This means a person under age 65 will be able to contribute non-concessional contributions totalling $450,000 over three income years without exceeding their non-concessional contributions cap (subsections 292-85(3) and (4) of the ITAA 1997).
The bring forward will be triggered automatically when contributions in excess of the annual non-concessional contributions cap are made in an income year by a person who is under age 65 at any time in the year where a bring forward has not already commenced (subsection 292-85(3) of the ITAA 1997).
Where a bring forward has been triggered, the two future years' entitlements are not indexed.