• For 2013-2014, a $35,000 concessional contributions cap applies for those who were aged 59 years or over on 30 June 2013. The $35,000 concessional cap will apply from 2014-2015 for those aged 49 years or over on 30 June of the previous income year.

  • From 1 July 2013, excess concessional contributions tax has been abolished. Instead, excess concessional contributions are included in an individual's assessable income (and subject to an interest charge). Excess non-concessional contributions tax continues to apply where relevant.

  • Individuals who wish to take advantage of the concessionally taxed superannuation environment but wish to stay under the relevant contributions caps should consider keeping track of contributions and avoid making last minute contributions that would be allocated to the next financial year.

  • Individuals with salary-sacrifice superannuation arrangements may want to have early discussions with their employers to help ensure contributions are allocated to the correct financial year.

  • From 2012-2013, individuals earning above $300,000 are subject to an additional 15% tax on concessional contributions. However, despite the extra 15% tax, there is still an effective tax concession of 15% (ie the top marginal rate less 30%) on their contributions up to the relevant cap.


Superannuation should not necessarily be viewed as a year-end planning matter, but rather as a long-term retirement savings approach. However, it is worth reflecting on the various concessions and deductions available under the superannuation system, which may impact the tax position of a taxpayer.

Note that the current government has pledged "not to make any unexpected detrimental changes to superannuation"; however, legislation and regulations are expected to continue to be implemented where urgent action is required to provide certainty or to implement election policy commitments.

Superannuation contributions are classified as either "concessional" or "non-concessional". Contributions above the annual contributions caps may be subject to excess contributions tax levied on the individual, who may withdraw from their superannuation fund an amount to meet the excess contributions tax liability. Note that from 1 July 2013, excess concessional contributions tax has been abolished and a new taxing regime has been introduced. Excess non-concessional contributions tax continues to apply where relevant. (See Excess concessional contributions - new regime from July 2013 below.)

Below is a table summarising the types of contributions and the annual contributions caps.

Type of contribution1

Annual contribution cap 2013-2014

Annual contribution cap 2014-2015

Excess contributions tax4

Concessional - under age 50

Concessional - age 50-59

Concessional - age 60-74

Non-concessional

Non-concessional (3-year)2

$25,000

$25,000

$35,0003

$150,000

$450,000

$30,000 (expected only)

$35,0003

$35,0003

$180,000 (expected only)

$540,000 (expected only)

31.5%4

31.5%4

31.5%4

46.5%5

46.5%5

1 If a member's TFN has not been quoted to the superannuation fund by 30 June each year, "no-TFN contributions income" is taxed at 46.5% (47% from 1 July 2014) in the hands of the receiving fund. A superannuation fund must return non-concessional contributions within 30 days if the member has not quoted a TFN.

2 Individuals under 65 years of age may bring forward the non-concessional cap for the next two years.

3 For 2013-2014, a $35,000 concessional contributions cap applies for those who were aged 59 years or over on 30June 2013. The $35,000 concessional cap will apply from 2014-2015 for those aged 49 years or over on 30June of the previous income year.

4 Excess concessional contributions tax of 31.5% was previously levied on the individual (on top of the original 15% contributions tax paid by the fund). From 1 July 2013, excess concessional contributions tax has been abolished. Instead, excess concessional contributions are included in an individual's assessable income (and subject to an interest charge). (See Excess concessional contributions - new regime from July 2013 below.)

5 Non-concessional contributions in excess of a person's cap are taxed at 46.5% (47% from 1 July 2014).


Some items that taxpayers may want to consider include the following:

  • Checking the age of the individual to identify the relevant contributions caps.

  • Investigating or reviewing superannuation salary-sacrifice arrangements.

  • Responding to changes in personal circumstances, such as pay rises or extended time off work, that would alter the amount of concessional contributions made.

  • Making additional after-tax non-concessional contributions.

  • Triggering the bring-forward provisions of the non-concessional contributions cap.

  • Identifying concessional contributions relating to multiple jobs.

  • Considering making a contribution on behalf of a spouse.

  • Checking eligibility for the government's co-contribution scheme.

  • Checking the amount of employer-paid costs, such as administration fees, insurance premiums, etc, as they may count toward the concessional contributions cap.

  • Reviewing reasons for having more than one superannuation fund (if the person has multiple funds).
Timing of contributions

A contribution is considered to be "made" by a taxpayer or an employer when a cheque, or an amount of cash, is "received" by the trustee of the superannuation fund or RSA, except in the case of a post-dated or dishonoured cheque. According to Taxation Ruling TR 2010/1, a contribution by electronic funds transfer (EFT) is not made until an amount is credited to the fund's bank account.
 
Individuals who wish to take advantage of the concessionally taxed superannuation environment but wish to stay under the relevant contributions caps should consider keeping track of contributions and avoid making last minute contributions that would be allocated to the next financial year. However, if individuals decide to make a payment before 30 June, they should allow for possible delays and ensure that the fund will receive the amounts on time. For example, amounts paid by electronic funds transfer on 30 June may not be received by the fund until the next day, ie 1 July. Other payment options (eg via cheque in the mail or via a clearing house) may cause additional delays.
 
Individuals with salary-sacrifice arrangements for superannuation may want to have early discussions with their employers to help ensure contributions are allocated to the correct financial year.
 
Excess concessional contributions - new regime from July 2013
 
Excess contributions tax no longer applies in respect of excess concessional superannuation contributions made on or after 1 July 2013. Instead, new rules have been introduced so that individuals are taxed on any excess concessional contributions at their marginal tax rates (rather than a 46.5% tax for all taxpayers). This is achieved by including any excess concessional contributions in an individual's assessable income from the 2013-2014 income year (and applying an interest charge to take account of the deferred payment of tax): Div 291 of ITAA 1997. Individuals can elect to release up to 85% of their excess concessional contributions from their superannuation fund to the Commissioner as a "credit" to cover the additional personal tax liability.

Note that excess non-concessional contributions tax continues to be payable, despite the abolition of excess concessional contributions tax from 1 July 2013. An individual's non-concessional contributions also continue include their excess concessional contributions (which, as noted above, are included in the individual's assessable income from 1 July 2013). Any excess concessional contributions that are released from an individual's superannuation fund to the Commissioner are reduced by 100/85 for the purpose of determining their non-concessional contributions.
 
Extra 15% Division 293 tax for higher income earners
 
From the 2012-2013 income year, individuals above a "high-income threshold" of $300,000 are subject to an additional 15% "Division 293 tax" on their "low tax contributions" (essentially concessional contributions). As a result, the effective contributions tax has been doubled from 15% to 30% for certain concessional contributions (up to the concessional cap) for "very high-income earners", ie those with income (plus the relevant concessional contributions) above the $300,000 threshold.

Prior to 1 July 2012, the 15% flat tax on concessional contributions paid by the receiving superannuation fund provided high-income earners with a larger tax concession than those on lower marginal tax rates. However, despite the extra 15% tax on concessional contributions for individuals with incomes above $300,000, there is still an effective tax concession of 15% (ie the top marginal rate less 30%) on the individual's concessional contributions up to the cap of $25,000 (or $35,000 from 2013-2014 for those aged 60 years and over). Nevertheless, taxpayers who exceed the $300,000 high-income threshold should review their superannuation contributions and salary-sacrifice arrangements to take into account any impact of the additional 15% Division 293 tax.

ATO administrative penalties for SMSF trustees

The current government has implemented the previous government's proposal to give the ATO new powers to impose administrative directions and penalties for certain contraventions by trustees of self managed superannuation funds (SMSFs) from 1 July 2014.

Under the changes, the Commissioner can give rectification directions, such as a direction that a trustee ensure that the fund begin complying with the relevant legislation, and education directions to ensure that a trustee's knowledge of the relevant legislation comes up to the requisite standard. The Commissioner can also impose administrative penalties on SMSF trustees for certain contraventions of the superannuation law. (See the Tax and Superannuation Laws Amendment (2014 Measures No 1) Bill 2014, which received Royal Assent on 18 March 2014.)

Deeming rules for account-based income streams

The income test treatment of account-based superannuation income streams, for products assessed from 1 January 2015, will be aligned with the deemed income rules applying to other financial assets. Account-based income streams held by income support recipients immediately before 1 January 2015 will continue to be assessed under the previous rules unless recipients choose to change to a product that is assessed under the new rules. (See the Social Services and Other Legislation Amendment Bill 2013 - received Royal Assent on 31 March 2014 as the Social Services and Other Legislation Amendment Act 2014.)

Lost superannuation transfers to the ATO
 
A trustee of a regulated superannuation fund is required to report details about small accounts of lost members, and inactive accounts of unidentifiable lost members, and pay these amounts to the Commissioner half-yearly.

From 31 December 2012, "unclaimed money day", the account balance threshold below which accounts of "lost members" must be transferred to the ATO increased to $2,000. In addition, the period of inactivity before "inactive accounts" of unidentifiable members must be transferred to the ATO decreased to 12 months. The current government has confirmed that it will proceed with the previous government's proposal to further increase the account balance threshold to $4,000 from 31 December 2015 (and to $6,000 from 31 December 2016).
 
From 1 July 2013, the Commissioner will pay interest (generally at the 10-year Treasury bond rate) on payments of unclaimed superannuation money.

Superannuation splitting

A member of an accumulation fund (or a member whose benefits include an accumulation interest in a defined benefit fund) is able to split with their spouse superannuation contributions made from 1 January 2006. The spouse contributions splitting regime also covers employer contributions to untaxed superannuation schemes and exempt public sector superannuation schemes.
 
While the relevance of spouse contribution splitting has been reduced following the abolition of reasonable benefit limits and end-benefits tax for those aged 60 years and over, splitting contributions between spouses can still be a useful strategy to effectively transfer concessional contributions to the older spouse who will reach age 60 (and attain tax-free benefit status) first. In addition, contributions splitting may be relevant to access two low-rate cap thresholds for superannuation benefits taken before age 60. However, it is not possible to split "untaxed splittable contributions" (eg non-concessional contributions) made after 5 April 2007.
 
Importantly, it is not mandatory for a superannuation fund to offer a contributions-splitting service for its members. However, a trustee that accepts a valid application must roll over, transfer or allot the amount of benefits in favour of the receiving spouse within 30 days (90 days prior to 1 July 2013) after receiving the application.

Tax treatment

A member's contribution that is split and paid to another fund is considered a "contributions-splitting superannuation benefit" and treated as a roll-over superannuation benefit for the receiving spouse. As such, the contributions-splitting amount rolled over or transferred for the benefit of the member's spouse is not subject to 15% contributions tax in the hands of the fund.
 
If a contributions-splitting superannuation benefit is transferred to an account within the same fund and paid to a taxpayer because their spouse is a member of the superannuation fund, the receiving spouse is deemed by s 307-5(6) to be the member of the fund for the purposes of tax treatment of the superannuation benefit.

At the benefit payment stage, a contributions-splitting superannuation benefit is deemed to consist entirely of a taxable component of a superannuation benefit: s 307-140.

A self-employed person entitled to a tax deduction for a personal superannuation contribution under Subdiv 290-C of ITAA 1997 who wants to split personal contributions and claim a deduction must provide a notice under s 290-170 of ITAA 1997 to their superannuation fund before requesting the fund to split the contributions. Once a contribution has been split, a self-employed person is not able to make a new s 290-170 election to claim a deduction or amend an existing election in respect of the split amount: s 290-170(2)(d); reg 290-170.01 of the Income Tax Assessment Regulations 1997. (See Valid notice to claim deduction in Maximising Deductions article.)
 
Note that the spouse contributions-splitting regime is separate from the tax offset up to $540 for personal superannuation contributions made by a taxpayer on behalf of their spouse.

Spouse contributions tax offset
 
A tax offset of up to $540 is available under s 290-230 of ITAA 1997 for a resident taxpayer in respect of eligible contributions made by the taxpayer to a complying superannuation fund or an RSA for the purpose of providing superannuation benefits for the taxpayer's low-income or non-working resident spouse (including a de facto spouse).
 
A taxpayer is entitled to the spouse contributions tax offset only if:

  • the contribution is made on behalf of a person who was the taxpayer's spouse when the contribution was made;

  • both the taxpayer and the spouse were Australian residents and were not living separately and apart on a permanent basis when the contribution was made;

  • the total of the spouse's assessable income, reportable fringe benefits and reportable employer superannuation contributions for the income year is less than $13,800;

  • the taxpayer cannot and has not deducted an amount for the spouse contribution as an employer contribution under s 290-60 of ITAA 1997; and

  • if the contribution is made to a superannuation fund, it is a complying superannuation fund for the income year in which the contribution is made.
If the spouse in respect of whom the contribution is made is aged 65 years or over, the contribution cannot be accepted by the fund unless the spouse satisfies the requisite work test. Likewise, a regulated superannuation fund is not able to accept contributions on behalf of a spouse aged 70 to 74 years.

Spouse's income test and limit on amount of tax offset

The assessable income, reportable fringe benefits and reportable employer superannuation contributions of the spouse must be less than $10,801 in total to obtain the maximum tax offset of $540, and less than $13,800 to obtain a partial tax offset.
 
The taxpayer's own assessable or taxable income, and whether they qualify for a deduction or tax offset for any superannuation contributions made for their own benefit, is irrelevant to determining entitlement to the rebate. Similarly, whether the spouse has any other superannuation is also irrelevant.

There is no limit on the amount of the actual contributions that can be made on behalf of the spouse, merely a $3,000 limit on the contributions for which a tax offset can be obtained. If less than $3,000 is contributed, the tax offset is 18% of the actual amount of the contributions. If the sum of assessable income, reportable fringe benefits and reportable employer superannuation contributions (if any) of the spouse is greater than $10,800, the $3,000 maximum contributions subject to the tax offset is reduced by $1 for each dollar of assessable income, reportable fringe benefits and reportable employer superannuation contributions in excess of $10,800, and an 18% tax offset applies on actual contributions up to this maximum.

Transition to retirement pensions

A member of a regulated superannuation fund who has reached their preservation age (currently age 55) can access their superannuation benefits as a non-commutable income stream without needing to retire. As a result, workers have the option of retaining a connection with the workforce, rather than being forced to retire early simply to gain access to their superannuation.
 
Upon attaining preservation age, this limited condition of release (also referred to as a "transition to retirement pension" or "pre-retirement pension") allows superannuation benefits to be accessed through the existing range of non-commutable income streams. Importantly, eligibility for this condition of release is not subject to a work test (ie part-time and full-time employees qualify).
 
The minimum pension standards apply to transition to retirement pensions for a person who has reached their preservation age. However, transition to retirement pensions have a maximum annual payment limit of 10% of the account balance at the start of each financial year. Note that the Commissioner's administrative policy to allow a superannuation income stream to continue despite a failure to meet the minimum pension standards from 1 July 2007 may apply to transition to retirement pensions in respect of breaches of the "minimum" payments (but not the maximum 10% limit). (See Pensions - minimum annual payment amounts below.)

The category of "transition to retirement income stream" or "non-commutable allocated pension or annuity" cannot be cashed or commuted to a lump sum while the person is still working, unless they have satisfied a condition of release with a "nil" cashing restriction (eg permanent retirement from the workforce or reaching age 65).

Note that it is not compulsory for superannuation funds to offer their members these non-commutable income streams. Furthermore, the fund's trust deed must allow benefits to be accessed when a member reaches preservation age, without needing to retire, and must allow the payment of a non-commutable complying or allocated pension.

STOP: Note that it will not be possible to receive a pension (including a transition to retirement pension) from a MySuper product from 1 July 2013. As such, a MySuper member will need to switch to a separate choice product before commencing a transition to retirement pension.

Tax treatment of transition to retirement pensions
 
A pension paid from a taxed source to a person aged 60 years or over is totally tax-free (ie not assessable and not exempt income). As such, it is not counted in working out the tax payable on any other assessable income of the taxpayer.
 
For a pension paid to a person under age 60, the "taxable component" of the pension paid from a taxed source is included in the person's assessable income. A taxpayer above his or her preservation age (but below age 60) is entitled to a 15% tax offset in respect of the taxable component of the pension. Any tax-free component of a pension paid from a taxed source is tax-free, regardless of the pension recipient's age. Once the pension recipient reaches 60 years, their pension is received tax-free.

Transition to retirement pensions and salary-sacrifice strategies
 
Transition to retirement pensions allow various tax-effective strategies whereby a taxpayer who is above preservation age can draw down their superannuation via a transition to retirement pension while, at the same time, salary sacrificing employment income back into retirement savings.
 
Instead of being taxed as employment income at the taxpayer's marginal rate, the salary-sacrificed superannuation contributions are only taxed at the rate of 15% on entry into the superannuation fund. However, the amount available for salary sacrificing is effectively restricted by the annual concessional contributions cap. For 2013-2014, the concessional cap is $25,000 (or $35,000 for those who were aged 59 years or over on 30 June 2013).
 
Note that the effective contributions tax has been doubled from 15% to 30% for certain concessional contributions for those above the $300,000 income threshold. As such, taxpayers who exceed this threshold should review their superannuation contributions and salary-sacrifice arrangements to take into account any impact of the additional 15% tax. (See Extra 15% Division 293 tax for higher income earners above.)
 
To access income to live on, the person can access their superannuation via a non-commutable income stream (eg a transition to retirement pension). A pension paid to a person aged 60 years or over is totally tax-free. A pension paid to a person under age 60 but above preservation age is included in their assessable income, but a 15% tax offset applies in respect of the taxable component of the pension.

While this strategy results in less overall tax being paid on the pension income (compared with employment income), the greatest advantage from converting employment income to pension income comes from the income tax exemption available to the superannuation fund in respect of income derived from assets that are set aside to support the fund's current pension liabilities.

STOP: Any salary-sacrifice arrangement must strictly comply with Taxation Ruling TR 2001/10.

Government co-contribution

Certain low-income earners (including self-employed persons) may qualify for a government superannuation co-contribution payment if the individual makes eligible personal contributions during an income year.

For 2013-2014, the lower income threshold is $33,516 (phasing down for incomes up to $48,516). That is, a government co-contribution up to a maximum of $500 per annum is available for a $1,000 eligible personal superannuation contribution during an income year.
 
For the purposes of determining the amount of co-contribution payable, a person's total income for an income year is reduced by amounts for which the person is entitled to a deduction as a result of carrying on a business. These deductions do not include work-related employee deductions or deductions that are available to eligible individuals (including the self-employed) for their personal superannuation contributions. However, for the purposes of determining eligibility for the co-contribution and whether an individual satisfies the 10% test, total income is not reduced by the deductions that result from carrying on a business.

Government co-contribution - income test 2013-2014

Total income (TI)1 ($)

Maximum government co-contribution ($)

0-33,516

33,517-48,515

48,516+

$500

$500 - ((TI - 33,516) x 0.03333)

Nil

1 A person's total income for these purposes is the sum of their assessable income, reportable fringe benefits total and reportable employer superannuation contributions.


STOP: The co-contribution is different to the government low-income superannuation contribution (LISC) of up to $500 for concessional contributions made by individuals on adjusted taxable incomes of up to $37,000. However, the current government has proposed to repeal the LISC (as part of its repeal of the mining tax) so that it will not be payable for concessional contributions made after 1 July 2013. (See also the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 - defeated in the Senate at the time of writing.)

Pensions - minimum annual payment amounts

Account-based pensions and annuities must meet the minimum payment rules set down in Sch 7 of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regs). The payment rules specify minimum annual limits only. From 2013 - 2014, the minimum drawdown amounts are calculated according to the standard percentage factors in Sch 7 to the SIS Regs.

Minimum annual drawdown factors

Age of beneficiary (years)

Minimum annual drawdown for 2008-2009, 2009-2010 and 2010-2011 (%)

Minimum annual drawdown for 2011-2012 and 2012-2013 (%)

Minimum annual drawdown for 2013-2014 onwards (%)

0-64

2

3

4

65-74

2.5

3.75

5

75-79

3

4.5

6

80-84

3.5

5.25

7

85-89

4.5

6.75

9

90-94

5.5

8.25

11

95+

7

10.5

14