Superannuation contributions explained

Superannuation plays an important part in ensuring and securing your lifestyle in retirement. To help you with this, you may choose to make additional contributions to ING Living Super in addition to the Superannuation Guarantee (SG) contributions made by your employer. By paying extra into your super, you may pay less tax and retire with more savings. Contributing small amounts over time is often easier than finding a spare 'lump sum' of money.

How do I contribute to my Super?

There are two types of contributions that can be made:

Concessional contributions

Concessional Contributions are before-tax contributions you may make to your ING Living Super account. You pay 15% contributions tax on these contributions (up to the concessional contributions cap) which may be lower than the tax on your take-home pay. Concessional contributions include Superannuation Guarantee (SG), salary sacrifice, award, voluntary employer and tax-deductible personal contributions. Anyone earning more than $300,000 ($250,000 from 1 July 2017) (conditions apply) may be subject to an additional 15% contributions tax on non-excessive concessional contributions.

Non-concessional contributions

Non-concessional contributions are any after-tax contributions you make to your ING Living Super account. These include any spouse and personal contributions made by you for which you do not claim a personal tax deduction. No tax is payable when these contributions are made to your ING Living Super account (subject to the non-concessional contributions cap).

Concessional contributions

Superannuation guarantee

Compulsory superannuation contributions are made on your behalf by your employer to ING Living Super. If you would like to have your SG contributions paid into your ING Living Super account, all you need to do is complete the 'Super Choice' form and submit this to your employer. The form can be found by logging in to ing.com.au, then clicking on 'My Super Finances' and then 'Contribute to your Super'.

Self-employed

If you are self-employed, you may be allowed to claim a tax deduction for contributions you make to your superannuation up to age 74. Self-employed people can also elect to make personal non-concessional contributions to their ING Living Super account and may be eligible for a Government co-contribution payment.

Low Income Superannuation Tax Offset

If you earn less than $37,000 a year (conditions apply), and your employer makes concessional (before-tax) superannuation contributions on your behalf, then you may be eligible for a refund of the contributions tax deducted from your ING Living Super account. If you are eligible, the Government will pay an amount of up to $500 directly to your ING Living Super account.

Non-concessional Contributions

Personal contributions

You can contribute from your after-tax income to your ING Living Super account. You can make regular personal contributions from your after-tax salary or personal one-off 'lump sum' contributions.

Government co-contributions

You may be eligible to receive a co-contribution from the government if you earn less than a set threshold in a financial year and make after-tax contributions to your super. Co-contributions are outlined in further detail below.

Spouse contributions

Your spouse may make contributions to your ING Living Super account, as long as the contribution is paid from an account in the name of your spouse or a joint account where your spouse is an account holder.

Also, if you earn less than $13,800 a year for the 2016/17 financial year or less than $40,000 per year from 1 July 2017 (conditions apply) and your spouse makes an after-tax contribution to your account, your spouse may be eligible for a tax offset of up to $540.

Contribution caps

Contributions that exceed the contributions caps will have additional tax applied to them. The caps for 2016/17 and 2017/18 are outlined below:

Concessional contributions cap

Age at 30 June 2016
Annual cap for 2016/17

Under age 49

$30,000

Age 49 and over

$35,000

From 1 July 2017, the concessional contributions cap will be reducing to $25,000 for all ages.

If you exceed the concessional contributions cap, you will receive a notice of excess contributions assessment from the ATO. The excess contributions will be included in your assessable income for the corresponding financial year and taxed at your marginal tax rate plus the Medicare Levy (less a 15% offset). In addition, you will be liable for the excess concessional contributions charge on the increase in your tax liability. This charge is applied to recognise that the tax on excess concessional contributions is collected later than normal income tax.

You may apply to withdraw 85% of the excess concessional contribution you made into your super account. Unless you choose to withdraw the excess contribution amount, the contribution will also become a non-concessional contribution, and as such it may be possible to have both rates of tax apply to the same contribution.

Non-concessional contributions cap

Age on the first day of the financial year
Annual cap for 2016/17

Under age 65

$180,000 annually, or $540,000 under the 'bring forward rule'*

Age from 65 to 74

$180,000 annually

Age 75 and over

$0 - non-concessional contributions cannot be made

*Up to 30 June 2017, the ‘bring forward rule’ means, if you are under 65 you can contribute up to three times the annual amount in a financial year. If you have triggered the bring forward rule in 2015-16 or 2016-17 but have not fully utilised the bring forward amount before 1 July 2017 transitional arrangements will apply to reflect the reduced non-concessional contributions caps.

From 1 July 2017, the non-concessional contributions cap will be lowered to $100,000 p.a.

If you are under the age of 65 you will be eligible to ‘bring forward’ up to 3 years of non-concessional contributions. However, this will be limited to :

2 years of non-concessional contributions if your total super balance is between $1.4 - $1.5 million.

1 year of non-concessional contributions if your total super balance is between $1.5 - $1.6 million.

No non-concessional contributions if your super balance is greater than $1.6 million.

If you exceed the non-concessional contributions cap, you may be subject to excess non-concessional contributions tax. You have a choice of how your contributions in excess of the non-concessional cap are taxed. You elect your choice by completing the ATO excess non-concessional contributions (ENCC) election notice and returning to the ATO. The ATO will then send the instructions to the relevant super fund. Once you have made your election it cannot be changed.

There are three options available for the 2016/17 financial year onwards:

1. Release amount from superannuation

You can elect to have excess non-concessional contributions (and associated earnings) withdrawn instead of paying the excess non-concessional contributions tax. If you choose this option you are electing to release all your excess non-concessional contributions and 85% of the associated earnings from your super fund. The full amount of the associated earnings will be included in your assessable income and taxed at your marginal rate of tax. A non-refundable tax offset of 15% of the earnings will be applied to recognise any tax paid by the super fund.

2. Pay excess non-concessional contributions tax on the excess amount

If you choose not to release your excess non-concessional contributions from your super fund you will receive an assessment where the excess will be taxed at the highest marginal tax rate. You will receive a compulsory release authority with the assessment which you need to give to your super fund to pay the amount of the assessment. The super fund will release the amount to you and you need to pay the tax to the ATO.

3. Advise the ATO you have no money in Superannuation

If the ATO is satisfied that the value of your superannuation interests in nil then the full associated earnings stated in the determination will be included in your assessable income and taxed at your marginal rate of tax. A non-refundable tax offset of 15% of the earnings will be applied to recognise any tax paid by the super fund. ING Living Super cannot accept non-concessional contributions where the amount exceeds your non-concessional cap in a single contribution.

Summary of age restrictions on contribution types

Your eligibility to make different contributions is based on your age and the type of contribution that you, your employer or spouse wishes to make. The following table summarises when contributions can be made.

Summary of age restriction on contribution types

1. Gainfully employed means employed or self-employed (for gain or reward) for at least 40 hours in a period of not more than 30 consecutive days in the financial year in which the contribution is made.
2. If eligible, you may be able to claim a tax deduction for your personal contributions. You must complete a personal tax deduction notice and receive an acknowledgement from us before claiming personal contributions as a tax deduction in your tax return.

What is a co-contribution?

The Government may top up your super by matching 50 cents for every $1 you add to your super, up to a maximum of $500. To qualify, you need to contribute to your super account from your take-home pay and earn less than the set thresholds (discussed below). The co-contribution is not subject to contributions tax.

How much will you get?

If you make a personal after-tax contribution for which no tax deduction is claimed and your total income (conditions apply) is under the co-contributions upper threshold ($51,021 for 2016/17 and $51,813 in 2017/18), the Government may contribute $0.50 for each dollar you contribute up to $500 p.a. The maximum co-contribution payable reduces for every dollar your total income exceeds the lower threshold ($36,021 for 2016/17 and $36,813 for 2017/18), until your total income reaches the upper threshold.

To be eligible for the Government co-contribution you must satisfy all of the following requirements:

you don't claim a tax deduction for the personal super contributions you make during the financial year;

you must earn 10% or more of your total income from carrying on a business, eligible employment, or both (From 1 July 2017 this requirement no longer applies);;

your total income (conditions apply) must be under the co-contributions upper threshold;

you must not be a temporary resident at any time during the income year in which the contribution is made (certain exceptions may apply);

you must be under 71 years of age at the end of that income year; and

you must lodge a tax return.

Full information regarding eligibility for the Government co-contribution can be found at ato.gov.au.