It’s nearing the end of the financial year, and that’s the time we traditionally review superannuation contributions.
There are two types of contributions – concessional and non-concessional contributions. We’ve covered concessional contributions, and now we’ll discuss non-concessional contributions.
What are non-concessional contributions?
For those that need a refresher, non-concessional contributions refer to the types of contributions that have no tax deduction claimed against them. Because no tax deduction has been claimed, no contributions tax is charged when deposited into super.
The general non-concessional contribution limit is $100,000 per person, per financial year. However, this limit doesn’t apply to everyone and will vary according to the type of contribution and how much you already have in superannuation.
What should I think about when planning my non-concessional contributions for 30 June 2020?
- The work test
Previously if you were over 65 years of age you needed to meet a work test (40 hours in any 30 day period during the financial year) in order to make any contribution. Since 1 July 2019 individuals between 65 and 75 years of age who have recently retired may be able to make additional contributions if they meet certain requirements.
If you meet all of the requirements below you may still be able to make contributions despite not meeting the work test requirement this year:
- You met the work test in the prior financial year. and
- You have a Total Superannuation Balance (TSB) of less than $300k at the end of the previous financial year, and
- You have not previously used the work test exemption in a previous financial year
- Your Total Superannuation Balance (TSB) exceeds $1.6million
Although the general non-concessional contribution limit is $100,000 per person, per financial year, this does not apply if you have a super balance over $1.6m. Once you have exceeded this amount at the end of the prior financial year, you are no longer able to make non-concessional contributions.
However, you are still able to make concessional contributions.
- Utilising the 3 year ‘bring forward’ contributions
If you are under 65 and have less than $1.6m you can make 3 years of non-concessional contributions in one year. For example, if you make a non-concessional contribution of $120,000 prior to 30 June 2020, you have $180,000 left to contribute prior to 30 June 2022.
When utilising the ‘bring forward’ contributions you need to watch out for your total superannuation balance. See the table below to see how much in non-concessional contributions you can make, and whether you’re able to utilise the bring forward provisions.
| Total Super Balance (TSB) on 30 June of prior year | Non-concessional contribution cap for current year | Bring forward period |
| Less than $1.4million | $300,000 | 3 years |
| $1.4million to $1.5million | $200,000 | 2 years |
| $1.5million to $1.6million | $100,000 | None – $100k general cap applies |
| $1.6million or more | $0.00 | Not applicable |
Want to make $400k of contributions instead? Consider only putting in $100k or less prior to 30 June 2020, then contributing the remaining $300k in July 2020. Note that this will mean that you will not be able to make further contributions until July 2023, but this might be handy if you’ve received a one-off larger balance of money to contribute. This only works if your total super balance will be less than $1.4million otherwise you’ll be caught be the limits in the table above.
- Make a contribution on behalf of your spouse
If your spouse’s assessable income, employer contributions and reportable fringe benefits are below $40,000, you might be entitled to an 18% tax offset of up to $540 for making a $3,000 non-concessional contribution for your spouse.
Not only does this help boost your spouse’s retirement savings, but it can also help you if you have close to a superannuation balance threshold (either $500k for eligibility for the carry forward contributions, or $1.6m for making additional non-concessional contributions). If your spouse is under Centrelink age requirement with a balance still in accumulation, it can also assist with being able to qualify for the Centrelink Age Pension as their amount can be quarantined from the assets test.
- The Downsizer Contribution
The downsizer contribution was introduced as part of the 2018 Budget in an effort to address housing affordability in Australia. From 1 July 2018 if you are over 65 years of age and meet the eligibility requirements you may be able to choose to contribute up to $300,000 from the proceeds of selling your home.
What is special about this kind of contribution is that unlike the other contributions above you don’t need to meet a work test, your total super balance doesn’t matter, and it doesn’t count towards the non-concessional cap. That being said, if you are also making additional voluntary non-concessional contributions consider making your downsizer contribution after all other contributions are made to avoid any issues with the Total Super Balance cap.
You will be eligible to make a downsizer contribution to super if you can answer yes to all of the following:
- You are 65 years or older at the time of the contribution (there is no maximum age limit)
- The amount you are contributing is from the proceeds of selling your home where the contract of sale is exchanged on or after 1 July 2018
- Your home was owned by you or your spouse for 10 years or more prior to the sale
- Your home in Australia is not a caravan, houseboat or other mobile home
- The proceeds from the sale of the home are either exempt or partially exempt from CGT under the main residence exemption
- You have provided your super fund with the Downsizer Contribution Into Super form either before or at the time of making the contribution
- You make your downsizer contribution within 90 days of receiving the proceeds of the sale (usually at the date of settlement)
- You have not previously made a downsizer contribution to your super from the sale of another home
Some interesting things to note with the downsizer contribution are that even if the property is 100% owned by one person both persons of a couple can contribute $300k each, and there is no requirement that a couple has been together for the 10 year period of ownership. Additionally, a property transferred or sold to a related party still qualifies.
If you would like additional information please do not hesitate to contact me or ask your question in the comment box below.
