Super contribution caps

Although we recommend adding extra money to your super, there are rules around how much you can add, these are known as ‘contribution caps’.

Contribution caps are applied to limit the amount of money you can add to your super every financial year. If you contribute over the allocated amount, there may be tax implications.

There are different types of contributions you can make, most of which will be either classed as:

  • concessional (before-tax) contributions
  • non-concessional’(after-tax) contributions. 

Contribution caps apply to both of these. Contribution caps are administered by the ATO, so if you have multiple super accounts, even with different super funds, any money you contribute to those accounts will count towards your individual contribution caps.

Concessional contribution cap

Any money that you add to your super before-tax including employer contributions, salary sacrifice and any money you claim a tax deduction on are considered concessional contributions. 

The current concessional contribution cap from 1 July 2021 is $27,500.

Carry-forward unused concessional contributions

The government allows you to carry-forward unused amounts of your concessional contribution cap from the previous five financial years, starting with the 2018-19 year.

To be eligible to carry-forward from previous years and contribute more than $27,500 in concessional contributions in a single financial year your account balance must have been less than $500,000 at the start of the financial year you utilise the rule.

Depending on your individual circumstances, there may be other rules that should be considered prior to carrying forward unused concessional contributions.

  • Example

    Michelle has a super balance of $375,000 at the start of the 2021/22 financial year. She knows that with her salary of $100,000 per year that her employer will contribute $10,000 in super guarantee (SG) contributions throughout the financial year. In addition to this she also has a salary sacrifice arrangement where her employer contributes $15,000 on her behalf.

    Michelle took six months unpaid leave in the previous financial year, so she’d like to make an additional $5,000 personal concessional contribution to 'catch-up' on the approximately $5,000 worth of SG contributions she missed contributing to her super when she was on leave. However, this would result in $30,000 of concessional contributions in one financial year – $2,500 over the $27,500 concessional contribution cap.

    Michelle made $25,000 in concessional contributions in four of the last five financial years. However, in the 2020/21 financial year her employer only made $5,000 in SG contributions and $10,000 in salary sacrifice contributions on her behalf, totaling $15,000 in concessional contributions.

    As the concessional contribution cap was $25,000 in the 2020/21 financial year, and her balance at the start of the 2021/22 financial year was under $500,000, Michelle can contribute up to a total amount of $37,500 to her super in concessional contributions in the 2021/22 financial year without breaching the concessional contribution cap. As a result, her intended additional $5,000 contribution would be within the caps due to the catch-up rules.

Exceeding the concessional contribution cap

If you exceed the concessional contribution cap (and any available catch-up amount) the ATO will let you know. Any amount exceeding the concessional contribution cap will be taxed at your marginal tax rate (minus a 15% offset).

The ATO will allow you to rectify the issue by withdrawing up to 85% of the excess amount from your super. If you choose to do so, no further penalty will apply. If you do not take the withdrawal offer, the excess amount will also be assessed against your non-concessional cap. The consequences of this may vary depending on your circumstances.

For further information on exceeding the concessional contribution cap, refer to the ATO's website.

  • Example

    Aidan, has been maximising his concessional contributions for the last five years, with a mixture of SG contributions and salary sacrifice contributions.

    From 1 July 2021, when the super rate raised from 9.5% to 10% Aidan’s employer, who last financial year made $12,500 in SG contributions, was required to contribute $13,157.90 for the financial year – an increase of $657.90 from previous years.  Aidan was unaware of the increased super rate and opted to salary sacrifice $15,000 for the 2021/22 financial year.

    As a result, at the end of the financial year Aidan’s employer would have contributed a mixture of SG contributions and salary sacrifice contributions on his behalf totaling $28,157.90. As both of these contributions are considered concessional contributions, and the current concessional contribution cap is $27,500, Aidan would have breached the concessional contribution cap by $657.90.

    Aidan would then be taxed on the excess $657.90 at his marginal tax rate (minus a 15% offset). The ATO would give Aidan the choice to rectify the breach by withdrawing up to 85% of the $657.90 that was contributed to his super. If Aidan chooses not to take the withdrawal offer, the $657.90 will also count towards his non-concessional cap.

Non-concessional contribution cap

Any funds that are contributed to your super account with after-tax money, such as additional contributions from your take-home pay that you don't claim a tax deduction on, are considered to be non-concessional contributions.

The current non-concessional cap, from 1 July 2021 is $110,000.

Individuals with total super balances greater or equal to $1.7 million from 1 July 2021 are unable to contribute any non-concessional contributions to their account.

Bring-forward rule

In certain circumstances, you may choose to ‘bring forward’ your contributions from future financial years if you wish to make non-concessional contributions in excess of $110,000 within a single financial year. This is often referred to as the ‘bring-forward rule’ and allows you to potentially contribute up to $330,000 within a single financial year. The bring-forward rule is subject to certain requirements, including:

You are under the age of 75*

Your ‘total super balance’ (i.e. the amount of super you hold across all of your super accounts) is less than certain thresholds at 30 June of the previous financial year.

You’re not currently within an already activated bring-forward period.

Depending on your circumstances there may a number of other rules that need to be considered prior to making additional contributions under the bring-forward rule. See a full list of the rules and eligibility criteria.

  • Example

    Laura is 55 years old with a total super balance of $857,000 at 30 June of the previous financial year and wants to make a one-off non-concessional contribution of $350,000. She has not previously used the bring-forward rule, but she has already made $50,000 of non-concessional contributions in the current financial year.

    Laura researches the bring-forward rule and notes the potential to contribute $330,000. However, when factoring in the $50,000 she’s already contributed this financial year, she realises that she’ll have to subtract this from the $330,000 or she’ll breach the non-concessional contribution cap.

    As a result, Laura is able to contribute an additional one off non-concessional contribution of $280,000. This amount, when taking into account her previously contributed $50,000 in non-concessional contributions, equals $330,000.

    Following this contribution, Laura will not be able to make any additional non-concessional contributions for three financial years without breaching the non-concessional contribution cap.

Exceeding the non-concessional contribution cap

If you exceed the non-concessional contribution cap the ATO will let you know. They will allow the excess amount to be withdrawn, (less taxes representing the earnings on the excess amount), taxed at your marginal rate, minus a 15% offset. If you decline to take this withdrawal offer, a further tax of 47% will apply to the entire excess amount.

See the ATO's website for further information on exceeding the non-concessional contribution cap, including calculations, tax implications, processes and examples.

* Individuals have 28 days from the day they turn 75 to make non-concessional (and other voluntary contributions), following that we are only able to accept Super Guarantee and Downsizer contributions. In addition to this, to use the bring forward rule you must have been under the age of 75 for at least one day in the financial year that you first trigger it.

Disclaimer: This document has been prepared and sent on behalf of Mercer Superannuation (Australia) Limited (‘Mercer Super’), ABN 79 004 717 533, Australian Financial Services Licence #235906, the trustee of the Mercer Super Trust ABN 19 905 422 981. Any advice contained in this document is of a general nature only, and does not take into account the personal needs and circumstances of any particular individual. Prior to acting on any information contained in this document, you need to take into account your own financial circumstances. Please consider the Product Disclosure Statement, Product Guide, Insurance Guide, and Financial Services Guide before making a decision about the product, or seek professional advice from a licensed, or appropriately authorised financial adviser if you are unsure of what action to take. 'MERCER' is a registered trademark of Mercer (Australia) Pty Ltd ABN 32 005 315 917. Copyright 2022 Mercer LLC. All rights reserved.