Making personal super contributions can allow you to invest more of your earnings into your superannuation, whilst also providing you with immediate benefits such as personal tax deductions, tax offsets and co-contributions. Personal super contributions must, however, be just that – personal – and must be made into superannuation funds directly from your personal bank account.
There are many types of personal super contributions including standard non-concessional contributions, concessional contributions, downsizer contributions, small business retirement CGT exemption contributions or personal injury contributions. Salary sacrifice contributions are also a type of personal super contribution, however they are made directly into your superannuation account by your employer out of your wage and account towards your limited concessional contributions cap. Here is more on the different types of contributions:
Personal Non-Concessional Contributions
A non-concessional contribution is a personal contribution made into superannuation simply to have more of your earnings invested in your super – you do not claim a tax deduction for this type of personal contribution. Non-concessional contributions are generally not made for an immediate benefit unless you contribute to your spouse’s superannuation account and claim the ‘spouse contribution tax offset’. The cap for non-concessional contributions is $110,000 per person, per financial year, however you can also contribute up to $330,000 at any stage over a three-financial year period, with no regard to the annual cap. If you are under 75 years of age, you are able to make personal non-concessional contributions unless your total super balance exceeds $1.7 million.
Personal Concessional Contributions
Concessional contributions are those that you claim a personal tax deduction for. Once you have made a concessional contribution, you must notify your super fund of your intention to claim a tax deduction for that contribution. The cap for concessional contributions is $27,500 per person, per financial year. This cap includes salary sacrifice contributions and any employer contributions over the financial year. Any unused caps, from the previous 5 years, can be carried forward and used if your total super balance was below $500,000 on 30 June of the previous financial year. If you are under 75 years of age, you are able to make personal concessional contributions and use the carry forward rule.
Downsizer Contributions
Downsizer contributions are classified as non-concessional contributions but do not count towards your personal non-concessional contribution cap. You must be at least 60 years of age and have recently sold a home that you and your partner have owned for at least 10 years. Downsizer contributions must be made within 90 days of receiving the proceeds from the sale of your home. Each of you can contribute up to $300,000 per person into your super account using the downsizer contribution – however this can only be done once in your lifetime.
Small Business Retirement CGT Exemption Contribution
This contribution type allows you to make a contribution of up to $500,000 worth of capital gains resulting from the sale of an active business asset to be exempt from CGT. Those who are under 55 years of age must contribute the exempt portion of the sale proceeds to their super fund, where those over 55 years of age can choose to contribute or not.
Small Business 15 year Exemption Contribution
This personal contribution type allows you to dispose of an active business asset without paying any GST, as long as you are 55 years or older and are retiring. You must have owned the business for at least 15 years. You can contribute the sale proceeds to your super fund without the amount counting towards your personal non-concessional contribution cap.
Personal Injury Contributions
Any personal injury settlement, court-order compensation or damages for personal injury can also be used as a personal contribution to your super. You can also select whether this amount will be excluded from or partly-excluded from your personal non-concessional contribution cap.
In Summary:
There are a variety of options when it comes to personal super contributions – you simply need to assess the immediate benefits and/or long-term benefits you hope to gain from these contributions. It is best to discuss your options with your Accountant or Super Specialist before making any personal contributions as the ever-changing rules and contribution caps can be confusing for those without experience.
For more information, contact Lana Matovic and her team at Matovic Business Accountants to discuss your options today! Email us at info@matovicaccounting.com.au or call (07) 3557 5721.
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