Contributing to an SMSF

Making contributions to your SMSF

Contributions can be made to your SMSF in cash or by the transfer of investments permitted under the superannuation legislation. You may need to pay capital gains tax on some of the investments you transfer to the fund, such as listed shares or commercial property.

Other amounts may be treated as contributions to your SMSF. These include payments you or someone else make on behalf of your SMSF but are not reimbursed for the expense.

Who can contribute

Contributions to your SMSF are usually made by you or your employer but can be made by parents for a child or for a spouse.

Your SMSF can accept contributions if you are under 65 or between 65 and 75 if you work at least 40 hours in 30 consecutive days in a financial year. Downsizer contributions can be made any time after you have reached 65. If your employer has made contributions for superannuation guarantee or industrial award purposes contributions can be made at any time.

Which contributions are tax deductible?

Amounts you contribute to superannuation are generally not tax deductible. However, if you qualify and provide a notice to your SMSF you may qualify for a tax deduction on some or all the contributions that you make.

If contributions you make are not claimed as a tax deduction, you may be eligible to receive the Government co-contribution or low-income tax superannuation tax offset.

Your spouse may make contributions for you if you are under age 65 or you satisfy a work test between 65 and 70. These contributions do not receive a tax deduction, however depending on your assessable income your contributing spouse may receive a tax offset.

Your employer may claim a tax deduction for contributions made on your behalf. This will include salary sacrifice, superannuation guarantee contributions as well as contributions made under an industrial award.

A non-concessional contributions cap applies to non-deductible personal contributions made by you, your spouse or for a child under 18. A concessional contributions cap applies to all tax-deductible contributions made for you or by you.

How much can I contribute to my SMSF?

The amount that can be contributed as concessional or non-concessional contributions to your SMSF for you or by you depends on whether the contribution is tax deductible, your age and the total amount you have in superannuation on the previous 30 June.

Concessional contributions

Concessional contributions include employer contributions (including salary sacrifice contributions), personal contributions for which a tax deduction is claimed, certain foreign superannuation transfers, directed termination payments and some amounts allocated from fund reserves.

The annual concessional contribution cap for the 2018/19 and the 2019/20 financial years is $25,000 p.a. Concessional contributions are taxed at 15% contributions tax and are assessable income of the fund.

Non-concessional contributions

Non-concessional contributions are not taxed in the superannuation fund. They include, personal contributions for which no tax deduction has been claimed, spouse contributions, government co-contributions and certain foreign superannuation benefits.

The annual non-concessional contribution cap for the 2018/19 and the 2019/20 financial year is $100,000. However, for anyone under age 65 it is possible to access the bring forward rule which allows a person to make a total contribution of up to 2 or 3 years non-concessional contributions at any time during a fixed two or three-year period commencing in the first year in which the annual non-concessional contributions cap of $100,000 is exceeded. The application of the bring forward rule depends on the balance you have in all superannuation funds as at 30 June in the previous financial year.

The non-concessional contribution cap rules and the bring-forward rule applies as follows:

Total Super Balance at 30 June in the previous financial yearMaximum non-concessional contributionBring forward period
Less than $1.4 million$300,0003 years
$1.4 million to less than $1.5 million$200,0002 years
$1.5 million to less than $1.6 million$100,000N/A
$1.6 million or moreNilN/A

Source: Australian Taxation Office

Your total superannuation balance is the aggregate of your accumulation interest (both accumulation and transition to retirement pensions), modified transfer balance (including current pension account values) and any rollover benefits not already in accumulation account.

Your total superannuation balance is the aggregate of your accumulation interest (both accumulation and transition to retirement pensions), modified transfer balance (including current pension account values) and any rollover benefits not already in accumulation account.

Exemptions from the non-concessional cap apply to:

  • contributions made under the small business CGT concessions,
  • payments for structured settlements or personal injuries and
  • the downsizer contribution.

Anyone with a total superannuation balance of more than $1.6 million is not eligible for the government co-contribution or the low-income spouse tax offset.

What happens if I go over my contributions caps?

If your concessional or non-concessional contributions cap is exceeded interest rate and tax penalties apply to the excess.

Excess concessional contributions cap penalties

If your concessional contributions cap of $25,000 has been exceeded the excess will be taxed at your personal tax rate less a 15% tax offset and an interest rate penalty will apply to the excess from the commencement of the year in which it arose. You can elect to have 85% of the excess released from the fund or you can leave it in the fund, pay the penalty taxes from your own resources and have it counted against your non-concessional contributions cap.

Excess non-concessional contributions cap penalties

If you exceed your non-concessional contributions cap you have two options that you can choose:

Option 1

You can elect to release all your excess non-concessional contributions and 85% of your interest rate penalty from super. The amount of the interest rate penalty is included in your assessable income and taxed at your personal tax rate. A non-refundable tax offset equal to 15% of your interest rate penalty is applied to recognise any tax paid by your super fund.

Option 2

If you choose not to have your excess non-concessional contributions released from your super funds, you will receive an excess non-concessional contributions tax assessment. The excess amount is taxed at the highest marginal tax rate of 45% plus Medicare. You must choose the fund that will release your excess non-concessional contributions tax.

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