If you come into a large sum of money – whether it’s an inheritance, dividends, or something else entirely – putting some or all of it into your super can prove a prudent option if you’re saving for retirement.
That being said, there are limits on super contributions and you should consider the tax treatment, with different rules applying depending on your situation, such as whether you’re over or under 65.
How caps on non-concessional (after-tax) super contributions work
Individuals of different ages and with different super balances will have different caps on the amount they can contribute after-tax per financial year. According to the Australian Taxation Office (ATO), non-concessional contributions are usually not subject to contributions tax in the superannuation fund. But if you exceed the non-concessional super contributions cap that applies to you, the ATO advises the tax treatment can be a bit more complex.
The ATO will notify you if you’ve exceeded your contributions cap, and from 1 July, 2017 the process for managing excess contributions has become more streamlined. If you’ve gone over the limit, the ATO indicates that it will assess your information and amend your income tax assessment to include any earnings associated with the excess contribution. You will usually pay tax on your associated earnings at your marginal tax rate. Normal process is that the ATO will request your super fund(s) to release and send amounts to them, and they will use this to settle the tax. If your fund cannot or or will not voluntarily release the payment, or you have no money in super, then according to the ATO you will have to pay the tax bill yourself. While there are some other options outlined by the ATO for managing excess non-concessional contributions, you could end up paying tax on the earnings at 47%, so it’s important to understand all the ins and outs and seek advice if needed.
The following table contains details of the superannuation funds rated by Canstar based on someone aged 40-49. This table has been sorted by one-year performance (highest to lowest).
Please note that the performance information shown in the table is for the investment option used by Canstar in rating of the superannuation product.
To view the past performance of all super funds rated by Canstar, use our comparison tool:
What are the caps?
According to the ATO, as of 1 July 2017, individuals aged 65 or over but under 75 must meet a work test to make non-concessional contributions and have a flat cap of $100,000 per year, provided they have less than the general transfer balance cap ($1.6 million in 2017–18) in their super fund at the end of 30 June of the previous financial year. For those under 65, a sliding scale is applied based on the size of your super balance, with the maximum cap being $300,000 in total contributions over a three-year period. The following table is based on the 2017-18 rates provided by the ATO.
|Total Superannuation Balance||Contribution and bring forward available|
|Less than $1.4 million||Access to $300,000 cap (over 3 years)|
|Greater than or equal to $1.4 million and less than $1.5 million||Access to $200,000 cap (over 2 years)|
|Greater than or equal to $1.5 million and less than $1.6 million||Access to $100,000 cap (No bring-forward period, general non-concessional contributions cap applies)|
|Greater than or equal to $1.6 million||Nil|
Source: Australian Taxation Office
If you’re eligible for a bring-forward period, according to the ATO that just means that while the cap per year is ostensibly $100,000, you could contribute $300,000 in one year, but make no further contributions over the next two years to remain within the cap.
How do I pay after-tax money into my super account?
Making payments into your super account is a reasonably simple process. Most funds will let you pay either by BPAY or direct debit, with the former being handy for one-off payments and the latter being useful for recurring payments or payments larger than your daily BPAY limit. Instructions on how to make BPAY or direct debit payments to your fund specifically should be able to be found on your fund’s website or on your most recent paper statement. Make sure you’re aware of any fees your fund may charge for processing BPAY or direct debit payments before you make them.
Remember that regardless of how much you’re contributing to your super balance, it’s a good idea to make sure you’re with the right fund for your personal circumstances. You can compare funds and find the right one for you with Canstar.