Non-concessional contributions are generally personal contributions for which you do not claim a tax deduction.
As with Concessional Contributions, there are also Non-Concessional Contributions Caps (NCCC) for each financial year. For the current 2010-11 year the NCCC amount is $150k. From 1 July 2009 the NCCC is 6x the concessional contributions cap of $25k.
This time, there is no transitional cap for non-concessional contributions, however there is a ‘bring-forward’ provision which allows persons under 65 during a financial year to bring forward 2 years’ entitlements thereby giving access to a total of 3 years worth of NCCCs .
Essentially; in 2010-11 an individual may make up to $450k of non-concessional contributions, (being 3x $150k.) The individual then cannot contribute more non-concessional contributions until after 1 July 2013.
The Government Co-contribution
In 2003 the Australian Government passed legislation regarding Non-Concessional Contributions. This was introduced as an incentive for low to middle income earners to start actively saving more for retirement. The government initially matched dollar for dollar Non-Concessional Contributions made by eligible individuals.
This amount was then increased to 150% for the 2005 – 2009 financial years. The rate has now been reduced back to 100% from the 2009-10 financial year and beyond, up to a maximum of $1k.
The government co-contribution is not subject to income tax when received by a super fund doesn’t make up assessable income of the fund. It is classified as “preserved.”
Who is eligible to contribute to Super?
Any person under 65 may contribute to super regardless of employment status.
Personal deductible and non-concessional contributions may also be made persons aged 65 – 74 provided they work at least 40 hours in a period of not more than 30 consecutive days in the year.
A person aged 75+ is not able to make personal contributions to superannuation. An employer contribution for an employee over 75 is only deductible if the employer is required to make the contribution by an industrial award.
In addition, from 1 July 2007 provisions have been introduced that require a fund to return personal contributions where a member has not provided their Tax File Number (TFN.) These provisions were brought in more effectively administer the super system, in particular – the super caps. Once a super fund is aware that it has received a personal contribution from a member for whom they have no recorded TFN, they have 30 days to return the contribution. The contribution does not have to be returned if a TFN is provided for the member within 30 days.
Making contributions to superannuation isn’t always a simple thing. The contribution caps are strict and if they’re exceeded, the penalties can be severe – excess contributions tax can apply and the consequences are very expensive!