Concessional superannuation contributions are contributions made by (or on behalf of) a person that is included in the assessable income of the fund.
As such, they attract tax of up to 15%. However, for those individuals’ earning more than $300,000 per year, the applicable tax rate is 30%.
The term ‘concessional’ reflects the fact that someone is claiming a tax deduction or tax ‘concession’. That is either the employer or the individual, depending on the type of contribution being made.
Paying tax at 15% (or 30%) may be a ‘concession’ if the individual’s marginal tax rate is higher than this. For example, if you’re earning over $37,000 per year, your marginal tax rate is 32.5%. For every $1 you salary sacrifice to superannuation (salary sacrifice is a type of concessional contribution), this will save you 17.5 cents in tax. Of course the money is inside superannuation now and you may not be able to access it until retirement (over the age of 60). Compulsory preservation is, if you like, the ‘price’ of the tax concession.
In view of these tax concessions, the Government places a cap, or limit, on the amount that can be contributed to superannuation on this basis.
For the current 2017 financial year (ending 30 June 2017), the concessional superannuation caps are as follows:
|Under age 49 as at 30 June in previous financial year||Age 49+ as at 30 June in previous financial year|
Coming into the end of the 2017 financial year, you may wish to consider optimising the amount you contribute to superannuation on a concessional basis. Particularly in view of the fact that from 1 July 2017 (that is, the start of the 2018 financial year), the concessional contribution cap will reduce to a flat $25,000 regardless of age.
Please note, this article is for general advice purposes only. It has not taken into account your personal circumstances or financial goals. If you wish to access more personalised advice tailored to your circumstances and financial objectives, please contact our friendly staff today.