Non-concessional contributions
5.1 Non-concessional contributions types and cap
What is a non-concessional contribution (NCC)?
Non-concessional contributions include personal contributions for which an individual does not claim an income tax deduction. A non-concessional contribution is made using after-tax money.
Types of non-concessional contributions
| Type |
Description |
| Personal |
Contributions made by (or for) a member, where no tax deduction is claimed |
| Spouse |
Contributions made by a member for their spouse. The contribution count towards the recipient spouse's cap. |
| Contributions made for a child under 18 |
Contributions made by a third party to a child under 18 or other than: |
| |
- those made by the employer or spouse of the member
- the Government co-contribution
|
Amounts excluded from the non-concessional contributions cap
- Government co-contributions
- CGT cap contributions
- Personal injury contributions
The non-concessional contributions cap
| Year |
Non-concessional cap (p.a.) |
| 2021-22 and onwards |
$110,000 |
| 2017-18 to 2020-21 |
$100,000 |
| 2016-17 |
$180,000 |
Criteria to make non-concessional contributions
| Total Super Balance (TSB): |
A member with a total superannuation balance (TSB) of $1.9 million* or more on 30 June of the previous financial year cannot make non-concessional contributions. |
| Members aged 75^ years and older |
A member who is 75 years or older cannot make non-concessional contributions.
For members 75 or older, a super fund can only accept:
- mandated super contributions made for the member by their employer
- downsizer contributions.
|
From 2017-18 and later years, the non-concessional contribution cap is nil for a member had a total superannuation balance exceeding the general transfer balance cap (TBC ) for the year. These members are not allowed to make non-concessional contributions.
Transfer Balance Cap
| Income year |
Transfer Balance Cap (TBC) |
| from 1 July 2023 |
$1,900,000 |
^If a member is turning 75 during a financial year, they can make a non-concessional contribution to their super fund up to 28 days after the end of the month in which they turn 75
*The total superannuation balance increased from $1.7 million to $1.9 million on 1 July 2023.
This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements. 5.3 The work test
- The work test requires a member to be gainfully employed in order to claim a personal tax deduction for contributions to superannuation. To satisfy the work test**, a member must work for at least 40 hours during a consecutive 30-day period in the financial year in which the contributions are made.
When must a member meet the work test?
From the 2022/23 financial year, the work test is abolished for voluntary employer, non-concessional and salary sacrificed superannuation contributions for individuals aged 67 to 74.
However, individuals aged 67 to 74 will still need to meet the work test to be eligible for a tax deduction for personal contributions. These individuals will continue to lodge their notice of intent to claim or vary a personal superannuation contribution deduction with their tax return.
| Year |
Age |
Work test and work test exemption conditions |
| From the 2022-23^ financial year |
67 to 74 years |
A member does not need to meet the work test to make non-concessional contributions |
| From 2020-21 to 2021/22 financial years |
67 to 74 years |
A member did need to meet the work test or satisfy the work test exemption criteria, to make non-concessional contributions |
| Source: ATO |
Definition of gainfully employed
Employed or self-employed for reward in any business, trade, profession, vocation, occupation or employment. The member is remunerated in return for the personal service provided either as salary, business income, bonuses and commissions that are fully documented and declared for tax purposes. This does not include passive investment income such as rental income or dividend income. Furthermore, members who volunteer their services are generally not considered to be gainfully employed as they do not receive remuneration for their services.
^The Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021 passed on 10 February 2022, which removed the work test for those ages 67 to 74, allowing them to make non-concessional contributions.
This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements. 5.4 Bring-forward arrangements
When can the bring-forward rule be used?
If a member is under age 75* at any time during a financial year, they are able to bring forward up to two years' worth of non-concessional contributions (i.e.,3 x the annual non-concessional cap in one financial year), depending on an individual's total superannuation balance on 30 June of the previous financial year.
There is no requirement to elect to use the bring-forward rule - it is automatically triggered in the first financial year in which a non-concessional contribution exceeds the annual cap.
It should be noted that members with balances close to the total superannuation balance (TSB) limit are only able to bring forward non-concessional contributions up to that limit.
Non-concessional cap (NCC) and Total superannuation balance (TSB)
| Financial year |
Non-concessional cap (annual) |
Total Superannuation Balance (TSB) |
| 1 July 2023 onwards |
$110,000 |
$1,900,000 |
| 1 July 2021 - 30 June 2023 |
$110,000 |
$1,700,000 |
| 1 July 2017 - 30 June 2021 |
$100,000 |
$1,600,000 |
Bring-forward period from 1 July 2023
| Total super balance on 30 June of the previous year |
Non-concessional contributions cap for the first year |
Bring-forward period |
| Less than $1.68 million |
$330,000 |
3 years |
| $1.68 million to less than $1.79 million |
$220,000 |
2 years |
| $1.79 million to less than $1.9 million |
$110,000 |
No bring-forward period, general non-concessional contributions cap applies |
| $1.9 million or more |
nil |
Not applicable |
*Prior to 1 July 2022, the maximum age was 67. The Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021 passed on 10 February 2022, which removed the work test for those ages 65 to 74, allowing them to make non-concessional contributions and use the bring-forward arrangements.
This technical resource is intended for the use of financial advisers only. It is current at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements. 5.5 Personal injury contributions
Personal injury contributions are not counted against the non-concessional contributions cap. To qualify as a personal injury contribution the contribution must arise from the settlement of a claim in respect of a personal injury to the member.
Personal injury contributions are also called also known as structured settlements.
| Qualifying personal injury payments |
Details |
When contribution must be made |
| Structured settlements |
Settlements of a claim for compensation or damages for personal injury suffered by the persona and the claim is made by the person or their "legal representative"
The settlement takes the form of a written agreement between the parties to the claim (whether or not a court order is required to make the agreement effective
|
Within 90 days of the later of:
- receipt of payment or
- date agreement (or court order takes effect)
|
| Lump sum worker's compensation payment |
Settlement of a claim in relation to a personal injury suffered by the person under a low of Commonwealth or of a State or Territory relating to workers compensation |
Within 90 days of the receipt of the payment |
| Court order for a personal injury payment |
Order is made in respect of a claim that is for compensation or damages for personal injury suffered by the person and the claim is made by the person or their "legal representative".
the claim is based on the commission of a wrong, or on a right created by statute
the order is not an order for a structured settlement
|
Within 90 days of the later of:
- Receipt of payment; or
- Date the court order is made
|
Furthermore, the following conditions must be satisfied to qualify as a personal injury contribution:
- two legally qualified medical practitioners must have certified that, because of the personal injury, it is unlikely that the member can ever be gainfully employed in a capacity for which they are reasonably qualified because of education, experience or training, and
- the member or their legal personal representative gives the fund a competed Contributions for personal injury form when (or before) making the contribution. This effectively notifies the fund it is a personal injury contribution. This form can be obtained from the ATO website.
This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements. 5.6 Excess non-concessional contributions
When a member exceeds the non-concessional contributions (NCC) cap in a financial year, they have two options available as to how their excess NCCs will be taxed.
Option 1: The member can elect to withdraw excess NCC plus 85% of the associated earnings on the excess contributions, and tax is payable on the associated earnings, or
Option 2: The member is liable to pay excess contributions tax on the excess contributions.
- Election to withdraw excess non-concessional contributions (NCCs)
To avoid paying the excess NCC tax, a member can elect to withdraw the excess NCC plus 85% of the associated earnings on the excess contributions. The full amount of the associated earnings is taxed at the member's marginal tax rate, but the member is entitled to a non-refundable tax offset of 15% of the associated earnings that are included in their assessable income (given that they already paid superannuation contributions tax).
Excess non-concessional contributions tax is not imposed on excess NCCs if they are withdrawn from the superannuation fund. The ATO will issue a release authority to the super fund nominated by the member and the super fund will pay this amount directly to the ATO.
Excess non-concessional contributions election form
When a member completes the excess non-concessional contributions election form:
- The ATO will send a release authority to the super fund. They pay an amount to the ATO equal to their excess non-concessional contributions and 85% of the associated earnings amount. The super fund must action this request within 10 days.
- The ATO will amend a member's income tax assessment by including the full amount of the associated earnings as assessable income and providing a non-refundable tax offset of 15%.
- The ATO will send the member a notice of amended assessment, which may require a member to pay an amount to the ATO.
- The funds released to the ATO will be used to offset any ATO or commonwealth debts against the member may have and pay any remaining balance back to the member.
- Pay excess non-concessional contributions tax
Excess non-concessional contributions tax may be payable by a member who has excess NCCs in a year. The tax rate is 47%.
| Example: Working out how excess non-concessional contributions are taxed
Vinnie makes NCCs and exceeds his NCC cap by $100,000. Assume Vinnie already received his notice of tax assessment for the year with taxable income of $140,000.
The ATO determines the associated earnings amount is $19,000 and provides Vinnie with an excess NCC determination stating:
- an excess contribution amount of $100,000
- an associated earnings amount of $19,000
- a total release amount of $116,150 ($100,000 plus 85% of the associated earnings amount of $19,000)
Vinnie has 60 days from the issue date of the determination letter to make an election and notify the ATO.
Vinnie chooses option 1 - release amounts from super
Vinnie decides to release $116,150 from his super and have the associated earnings included in his assessable income. Vinnie does this by logging onto the myGov website and completing the excess NCC election form, choosing option 1 and nominating the super fund he wants the amount to be released from.
After receiving the valid election, the ATO will add Vinnie's associated earnings amount of $19,000 to his assessment with:
- amended taxable income of $159,000 ($140,000 plus $19,000)
- a non-refundable tax offset of $2,850 (15% of $19,000)
- an amount payable of $4,180
The ATO will also send the super fund a release authority requiring the fund to release $116,150 from his super.
The super fund pays the ATO the $116,150 in compliance with the release authority.
Vinnie chooses option 2 - pay excess NCC tax
Vinnie logs onto his myGov account and completes the excess NCC election form, choosing option 2 to pay excess NCC tax on the amount of $100,000. Vinnie also notifies the ATO of which fund he would like a release authority issued to in order to pay his tax liability.
The ATO issues Vinnie with an excess non-concessional contribution tax assessment for $47,000 ($47% of $100,000). The ATO sends an excess non-concessional contributions tax release authority to Vinnie's super fund instructing them to release $47,000 from his super. The super fund pays the $47,000 to the ATO in compliance with the release authority. The released amount will be offset against Vinnie's debt.
Vinnie does not choose an option
If the ATO does not receive a valid election form from Vinnie within 60 days of the determination letter issue date, Vinnie will automatically be defaulted into option 1 and the process of releasing the excess non-concessional contributions from his super will commence.
Vinnie's associated earnings amount of $19,000 is added to his assessable income. A notice of amended income tax assessment is sent to Vinnie with the following:
- an amended taxable income of $159,000 ($140,000 plus $19,000)
- a non-refundable tax offset of $2,850 (15% of $19,000)
- an amount payable of $4,180
The ATO will also send a release authority to Vinnie's super fund requiring the fund to release $116,150 from his super. The super fund pays $116,150 to the ATO in compliance with the release authority. The released amount will be offset against any outstanding tax or other Australian Government debts before any remaining balance is refunded.
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This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements. |
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