Q: I have $1.9 million in pension. Am I allowed to contribute to my accumulation super accounts? If so, how much can I contribute in terms of concessional contributions and non-concessional contributions? I’m 65 years old and not working now.
A: There are limits which are imposed on making non-concessional contributions, and that restriction is contained within the transfer balance cap rules. What it says is there are limits imposed on making non-concessional contributions when your total super balance at the end of the last financial year is not below the general transfer balance cap, which is currently $1.9 million.
Easy way to say that is if your total super balance at the end of last year is not below that cap, then your non-concessional cap this year is zero. So, any non-concessional contribution you make will be deemed excess contributions. So, there are limits, as I mentioned, on making contributions to super based on your total super balance. That total super balance needs to be below that cap currently sitting at $1.9 million.
Now, that cap only applies to non-concessional contributions. It doesn’t apply to concessional contributions. Even if your total super balance at the end of last year is above that, this doesn’t stop you from making concessional contributions. It doesn’t stop your employer from making your SG contributions. They can still take place all within that $27,500 cap.
However, there are limits imposed if you want to use your unused concessional contributions. If you have not used up all your concessional contributions over last five years, those unused amounts get carried forward and they grow. What it says is if your total super balance is below $500,000 at the prior 30th of June, then you can make use of those unused concessional cap amounts, making a larger contribution in the current year. Now, I raise that because you’ve mentioned, “I’ve got $1.9 million in pension”. You won’t be eligible for that. You wouldn’t be for the unused concessional because you’re above the $500,000. Just keep that in mind.
The next point that we need to think about is a work test for concessional contributions. We’ve looked at the balances, the total balance. Now we need to look at work tests. If you’re under 67, you can make personal contributions to your super, get a tax deduction, and so on. There’s no work test there. If you’re aged 67 and not yet 75, you got to pass the work test to make concessional contributions. You don’t need to worry about meeting a work test for non-concessional contributions when you’re allowed.
If you’re 75 and older, you can’t really contribute contributions to super and get a tax structure unless it’s done within 28 days to the end of the month in which you turn 75. You’re probably limited to your downsize of contributions in that case. I put that in there to show you that there’s not only a dollar value limit on contributions when you need to think about that, but also those age restrictions as well. Hopefully it helped. Have a look at the website for those guides around making non-concessional and concessional contributions.
