Do You Need to Adjust your Super Salary Sacrifice Amount Due to the Lowering of the Concessional Contributions Cap?

From 1 July 2017 onwards the ATO is reducing the concessional contributions cap to $25,000 for everyone.  In prior years the cap was $35,000 for individuals aged 49 and over and $30,000 for those under age 49.

Therefore, for the 2017/2018 financial year the maximum that anyone is able to contribute into their super account as a concessional contribution is $25,000, irrespective of their age.

Any concessional contributions will incur contributions tax, so the amount contributed to superannuation as a Concessional Contribution is not always the amount that will be credited to your account.

What is a Concessional Contribution?

A concessional contribution is any contribution made into your superannuation account where the contributor claimed a tax deduction for making the contribution.

Types of concessional contributions include:

  • Employer Superannuation Guarantee Contributions (mandatory contributions)
  • Salary Sacrifice Contributions
  • Personal Concessional (Deductible) Contributions

Also, here’s where it can get a bit confusing because if you own an insurance policy that is “super policy” (excluding insurances in your ordinary super account/s), then the premiums paid to your super policy will also count towards the cap.  How can you tell if it is an insurance super policy?  Ring your insurer to check.

Tax on Concessional Contributions

The general tax rate is 15% on Concessional Contributions.  So if your super fund receives $15,000 in concessional contributions throughout 2017/2018 then only $12,750 would be applied to your account balance and the remaining $2,250 would be paid to the ATO as tax.

So you may need to review how much you are salary sacrificing to your super so you don’t exceed the cap in 2017/2018.

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