With the new financial year commenced, it’s important to re-confirm the contribution caps for the 2020 financial year. But first it’s important we differentiate the types of contributions that can be made.
Superannuation contribution caps for the 2020 financial year
With the new financial year commenced, it’s important to re-confirm the contribution caps for the 2020 financial year. But first it’s important we differentiate the types of contributions that can be made. Although it can be difficult getting your head around the different types of super contributions, essentially there are two main types of contributions:
- Concessional contributions (before-tax contributions)
- Non-Concessional contributions (after-tax contributions)
Concessional contribution cap
Concessional contributions include employer contributions (including salary sacrifice) and personal contributions where a tax deduction will be claimed.
The concessional contributions cap for the 2020 financial year is $25,000 for everyone, no matter what your age is.
If you have a total super balance of less than $500,000 and do not use the full concessional contributions cap of $25,000, you can carry forward the unused amount and use it in subsequent financial years (up to a maximum of 5 years).
The non-concessional contribution cap
Non-concessional contributions are personal contributions made to a fund in which no tax deduction is claimed.
The non-concessional (after tax) contributions cap for 2020 financial year is $100,000 unless you are eligible to make ‘bring forward’ contributions. Members under 65 years of age have the option of bringing forward contributions of up to $300,000 over a three-year period depending on their total super balance (members with a total super balance greater than $1.4 million can contribute up to a reduced cap over a three-year period).
Anyone making large superannuation contributions should exercise extreme care to avoid excess contributions. Making sure you do not exceed the contribution caps will save you both money and time of dealing with excess contributions.
This is general information only. No investment advice has been provided to you. The information in this blog is general information only and has been prepared without taking into account your personal objectives, financial information and needs. You should consider any advice in this blog in light of your personal objectives, financial situation or needs before acting on it. You may wish to consult an accountant and or licensed financial adviser to do this. Hailston + Co assumes no responsibility for any actions you take independently, and without seeking professional advice from your accountant or licensed financial advisor.