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SMSF Contribution Limits

Contributing to your Self-Managed Super Fund (SMSF) is a great way to grow your retirement savings, but it’s important to stay within the contribution limits set by the Australian Taxation Office (ATO).

 

Exceeding these limits can result in additional tax liabilities and penalties.

At HelloLedger, we help trustees track and manage SMSF contributions, ensuring compliance with ATO regulations and avoiding costly errors.

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What Are SMSF Contribution Limits?

The ATO sets annual caps on the amount of money that can be contributed to an SMSF. These limits are divided into two categories: concessional contributions and non-concessional contributions.

Concessional Contributions (Tax-Deductible)

  • What are they?
    Contributions made before tax, including:
    - Employer Super Guarantee (SG) contributions.
    - Salary sacrifice contributions.
    - Personal contributions claimed as a tax deduction.
     

  • Limit:
    - $30,000 per year (as of the current financial year).
    - Unused caps from the previous five years can be carried forward if your total super balance is below $500,000.
     

  • Tax Treatment:
    - Taxed at 15% within the SMSF.
    - Additional 15% Division 293 tax applies if your income exceeds $250,000.

Non-Concessional Contributions (After-Tax)

  • What are they?
    Contributions made from after-tax income that are not claimed as a deduction.
     

  • Limit:
    - $120,000 per year or up to $360,000 over three years under the bring-forward rule, depending on your total super balance.
     

  • Tax Treatment:
    - Not taxed within the SMSF as they come from after-tax income.

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Excess Concessional Contributions (ECC)

If you exceed the $30,000 concessional contributions cap, the excess amount is treated as assessable income and taxed at your marginal tax rate, rather than the concessional 15% tax rate applied within the SMSFs.

How Are ECCs Taxed?

  1. You will receive an Excess Concessional Contributions Notice from the ATO.

  2. The excess amount is taxed at your marginal rate, minus a 15% tax offset to account for the tax already paid by the SMSF.

  3. You may also incur an Excess Concessional Contributions Charge (ECCC), which is an interest penalty applied to the extra tax liability.

How to Manage ECCs?

  1. Withdraw the Excess Amount: You can elect to withdraw the excess contributions from your SMSF to help pay the additional tax.

  2. Reallocate to Non-Concessional Cap: If you choose not to withdraw, the excess amount will count toward your non-concessional contributions cap, which may lead to further penalties if it exceeds the limit.

 

At HelloLedger, we help trustees track contributions, calculate ECC liabilities, and prepare documentation to manage excess contributions effectively.

Excess Non-Concessional Contributions (ENCC)

Non-concessional contributions are after-tax contributions made to your SMSF. These contributions are not taxed within the fund. However, if you exceed the non-concessional contributions cap—currently $120,000 per year (or $360,000 under the bring-forward rule over 3 years)—the excess amount may be subject to penalties and additional tax.

How Are ECCs Taxed?

  1. Excess Contributions Notice:
    - The ATO will issue an Excess Non-Concessional Contributions Notice if you breach the cap.
     

  2. Tax Treatment:
    - Excess contributions are taxed at the highest marginal tax rate of 45% (plus Medicare levy) unless you choose to withdraw the excess.
     

  3. Option to Withdraw Excess Contributions:
    - You can elect to withdraw the excess contributions, along with 85% of the associated earnings, to avoid paying the penalty tax.
    - The earnings component is taxed at your marginal tax rate, with a 15% offset for tax already paid within the SMSF.
     

  4. Retaining Excess Contributions:
    If you choose to leave the excess contributions in your SMSF, they will be taxed at 45%, in addition to any penalties.

How to Manage ECCs?

  • Track Contributions: Regularly monitor contributions to avoid breaching the cap.

  • Utilise the Bring-Forward Rule: Plan contributions over three years if eligible for the bring-forward rule, allowing a cap of $360,000 in one go.

  • Withdraw Excess Funds Quickly: Opt to withdraw excess contributions and associated earnings to reduce tax penalties.

  • Plan Contributions Strategically: Consider splitting contributions between financial years to stay within the cap limits.

Special Contribution Rules

Following are some other types of contributions your Fund may receive on your behalf.

Downsizer Contributions

Individuals aged 55 and over can make a downsizer contribution of up to $300,000 per person ($600,000 for couples) from the sale of their primary residence, regardless of contribution caps.your SMSF, they will be taxed at 45%, in addition to any penalties.

Spouse Contributions

Contributions can be made to your spouse’s super fund, and tax offsets may be available for contributions made on behalf of a low-income spouse.

Government Co-Contributions

Low- and middle-income earners who make non-concessional contributions may qualify for a government co-contribution of up to $500, boosting their retirement savings.

Low Income Super Tax Offset

Low income individuals earning  up to $37,000 a year, may be eligible to receive a low income super tax offset (LISTO) payment of up to $500.  LISTO is 15% of the concessional (before tax) super contributions paid into your super fund, up to a maximum of $500. 

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SMSF Contribution Limits FAQs

  • What happens if I exceed the concessional contribution limit?

  •  

  • Excess concessional contributions (ECCs) are taxed at your marginal tax rate, minus a 15% offset. You may also need to pay an interest charge on the additional tax. You can choose to withdraw the excess amount to reduce the impact.

  • What is the bring-forward rule for non-concessional contributions?

     

  • The bring-forward rule allows you to contribute up to $360,000 over three years, provided your total super balance is below the general transfer balance cap (currently $1.9 million).

What is Division 293 tax, and who does it apply to?

Division 293 tax is an additional 15% tax on concessional contributions for individuals with adjusted incomes over $250,000 per year.

Can HelloLedger help me manage excess contributions?

Yes, HelloLedger monitors contributions, calculates ECC liabilities, and prepares the necessary documentation and reports to help trustees stay ATO-compliant and avoid penalties.

  • Can I carry forward unused concessional contribution caps?

  • Yes, if your total super balance is below $500,000 on 30 June of the previous financial year, and you meet the age requirement for making concessional contributions, you can carry forward unused concessional caps for up to five years.

Can I make contributions to my SMSF if I’m over 75?

Contributions generally cannot be made after age 75, except for mandated employer contributions and downsizer contributions.

  • Are there penalties for exceeding non-concessional contribution caps?

  •  

  • Yes, excess non-concessional contributions may be taxed at 47%, or you may be required to withdraw the excess to avoid penalties.

Get in Touch

Ready to take control of your retirement savings with a Self Managed Super Fund? 

Contact HelloLedger today for expert SMSF services. Together, we’ll pave the way for a secure and prosperous retirement. Say Hello to strategic superannuation management and Goodbye to worry!

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