The non-concessional contribution cap refers to the maximum amount that can be contributed into superannuation as an after-tax contribution.
So, before you get all giddy about dumping your cold-hard cash into super for all those enticing tax concessions, it’s best you read through this first.
Non-Concessional Contribution Cap
The superannuation non-concessional contribution cap limits the amount you are able to contribute into super in any one financial year. The beginning of a financial year is 1 July and the end is 30 June.
The standard non-concessional contribution cap for the 2024 financial year (2023/2024) is $110,000 per person.
A non-concessional contribution is a contribution made into your super account that a tax deduction has not been claimed for by the contributor.
Generally, a non-concessional contribution is made into super from your personal bank account. However, in some cases, non-concessional contributions are made into your super account automatically from your wage. These will be noted on your payslip, possibly as ‘after-tax’ or ‘post-tax’ contributions (i.e. not salary sacrifice or SG contributions).
Non-Concessional Contribution Age Limit
While under age 75, there is no age restriction on making non-concessional contributions to super.
Non-Concessional Contribution Bring-Forward Rule
While under age 75, you are able to bring forward-up to two additional years worth of the cap. This means you can contribute $330,000 at any point over a three-financial year period – disregarding the standard $110,000 annual cap.
For example, you may decide to contribute $330,000 as a non-concessional contribution in the current financial year and then make no non-concessional contribution for the following two financial years. Or, you might contribute $220,000 in this year, $110,000 next year and nothing in the year after.
The bring-forward rule is automatically triggered in the first financial year that your non-concessional contributions exceed $110,000.
The bring-forward amount is based on the non-concessional contribution cap in the year that you trigger the bring-forward rule. You cannot bring-forward any proposed increased cap amounts.
Transfer Balance Cap & Non-Concessional Contributions
If your total super balance exceeds the super transfer balance cap of $1.9 million on 30 June of the previous financial year, then you are not permitted to make any further non-concessional contributions.
Also, you are only eligible to utilise the bring-forward rule to the point where your non-concessional contributions will not result in you exceeding the transfer balance cap, as shown in the table below:
|Total Super Balance on Most Recent 30 June||Non-Concessional Cap for the first year||Bring-forward period permitted|
|Less than $1.48M||$330,000||3 years|
|$1.48M to less than $1.59M||$220,000||2 years|
|$1.59M to less than $1.7M||$110,000||No bring-forward period|
|$1.7M or more||$0||n/a|
What Happens If I Exceed the Non-Concessional Cap?
If you exceed the non-concessional contributions cap, you will have two options:
1. Withdraw the excess amount, plus 85% of the associated investment earnings of the excess contributions; or
2. Pay excess contributions tax equal to the top individual tax rate (45%, plus the Medicare Levy) on the excess amount.
Benefits of Non-Concessional Contributions
The main benefit of non-concessional contributions is that you are investing more of your wealth in the tax-effective superannuation environment.
Superannuation is tax-effective, because all investment earnings are taxed at the concessional tax rate of 15%, which can often be lower than the tax applied to investment earnings if you were to invest that same amount in your personal name. In fact, capital gains tax within super can be as low as 10% if the investment owned and sold within super was owned for longer than 12-months.
Furthermore, when you eventually use your super to start an income stream, all investment earnings are received tax free.
Other benefits of making non-concessional contributions include potential access to the superannuation co-contribution, the spouse contribution tax offset and the potential reduction in death benefit taxes, as shown in this video:
Disadvantages of Non-Concessional Contributions
The main downside of making non-concessional contributions to super is that you are usually unable to access the amount contributed until you reach your superannuation preservation age and satisfy a superannuation condition of release, such as retirement or attaining age 65.
Another downside of non-concessional contributions, compared to concessional contributions, is that you are unable to claim a personal tax deduction for making the contribution. To be clear, you can claim a tax deduction for a personal super contribution (up to the relevant cap), but once you do, it ceases to be a non-concessional contribution and becomes a concessional contribution.
Non-concessional contributions are yet another retirement planning strategy that can help you increase your retirement savings tax-effectively, providing you with a more focused investment strategy and a regular income throughout retirement. Just be sure to remain within the contribution caps.
Our financial planning firm, Toro Wealth, specialises solely in helping 50 to 70 year-olds optimise their financial position in the lead up to retirement. If you’re interested in learning more about our service and cost, click here.