Caps on super contributions

Types of contribution caps

First things first, there’s a couple of different types of contribution caps.

One applies to before-tax contributions, and the other to after-tax contributions. If you go over either of these caps, you might end up paying extra tax on your super.

Before we get into the caps, let’s do a quick recap on what counts as before or after-tax contributions

Before-tax contributions include:

• Super payments from your employer

• Salary sacrificed contributions

• Any after-tax contributions you’ve claimed a tax deduction on

After-tax contributions include:

• Voluntary payments you make after income tax has been taken out

• Spouse contributions

• Any SUPERSUPER contributions

Caps on before-tax contributions

In most cases, you can contribute up to $30,000 before tax to your super each financial year, and this is taxed within the Fund at 15%.

If you’re contributing more than that, you may pay an extra 15% tax, meaning you’ll pay an overall 30% on some, or all of the contributions.

If you are not making pre tax contributions the most common way you might accumulate more than $30,000 to your super is if you earn over $250,000 a year from your combined income and Superannuation Guarantee (SG) payments. But you could also exceed this cap if:

• You’re adding to your super through salary sacrifices

• Or you’re making after-tax contributions, but are claiming a tax reduction on these payments.

Hang on, what happens if you go over the before-tax cap?

Going over your before-tax cap isn’t something to worry about. You’re still on your way to a fab retirement! But just so you're aware, these are the things that could happen if you exceed it.

Any contributions you make over the cap will be taxed at your marginal income tax rate, minus a 15% tax rebate. You may also be charged interest. If you’re not sure what a marginal tax rate is, you’re not alone! Your marginal tax rate all depends on your taxable income each financial year.

Here's an example. If your taxable income for the 2024-25 financial year was $45,000, your marginal tax rate would have been 16%. As your income increases, typically so does your marginal tax rate. So in this case, any before-tax contributions you make over the cap would be taxed at 16%.

So, at the end of the financial year – yes, tax time, our favourite time of year – the ATO will give you two options:

• Withdraw 85% of the excess contributions for that year

• Leave the excess contributions in your super, where they’ll be taxed at your marginal rate, and then count towards your after-tax contributions instead

Can unused cap amounts be carried over to the next year?

The simple answer is yes, in some cases.

You may be able to carry over unused portions of your limit over a rolling five-year period. It’s worth mentioning, there are some eligibility requirements for this:

• You’ll need to have a total super balance of less than $500,000 across all your super accounts – that includes any accounts you hold outside of GuildSuper.

• You must have contributed less than the before-tax cap for one or more of the previous five years.

If you want to know more about before-tax contribution caps, head to the ATO website.

After-tax contributions caps

Ok, so you know all about before-tax contributions. Now let’s talk after-tax contributions.

Usually, you can add up to $120,000 to your super each financial year as after-tax contributions. There is no 15% contributions tax payable on these contributions.

An exception to the usual limit is if you have a total super balance of $1.9 million or more. In this situation, your after-tax contributions cap is reduced to $0, meaning if you add any after-tax contributions, they’ll be taxed.

What if you go over your after-tax contributions cap?

The bad news is any excess after-tax contributions are taxed at 47%.

The good news is, at the end of the financial year the ATO will give you two options:

• You can withdraw the excess contributions, plus 85% of any earnings on these contributions.

• Or you can leave the contributions in your super, where they’ll be taxed 47%.

SUPER important info: Some types of after-tax contributions, such as downsizer contributions, aren't included in the cap. You can read more about this on the ATO website.

Can you carry over after-tax contribution caps to the next year?

This depends on your super balance, your age, and whether you’ve already brought your cap over from previous years.

To bring forward your after-tax contributions, you must:

• be under 75

• have not brought forward any after-tax contribution caps in recent years

• have a total super balance at 30 June of the previous year that is less than the transfer balance cap

If you want to know more about before-tax contribution caps, bring forward rules and the transfer balance cap, head to the ATO website.

IT'S IMPORTANT TO SEEK FINANCIAL ADVICE

The rules are quite complex, and it’s important to get it right, so we recommend you reach out to your financial adviser and ensure that any financial decision you make is appropriate for your personal objectives, financial situation and needs. You also have access to our team of financial advice Coaches who can provide you with advice about your contributions, within your GuildSuper account, at no additional cost to you.

You can contact the Coaches by calling 1300 COACH 0 (1300 262 240) or by emailing coach@guildsuper.com.au

This material has been prepared for informational purposes only. Any taxation, legal and other matters, including any interpretation of existing laws, referred to in this material is not intended to represent or be a substitute for specific taxation or legal advice and should not be relied on as such. You should obtain professional advice from a registered tax agent or legal practitioner. Existing laws may change from time to time.