Concessional contributions are contributions made into an SMSF and treated as the SMSF’s assessable income. The contributions are taxed in your SMSF at a concessional rate of 15%.
Trustees making concessional contributions can claim a personal income tax deduction. Concessional contributions are subjected to a yearly cap. From 1 July 2017, the general concessional contributions cap is $25,000 for all individuals.
- Employer Contributions
The most common types of concessional contributions are employer contributions (e.g. super guarantee and salary sacrifice contributions). Most SMSF’s receive concessional contributions from their employers at a rate of 9.5%.
- Low Income Superannuation Tax Offset
From 1 July 2017, low-income earner might be eligible for Low Income Superannuation Tax Offset (LISTO). The purpose of LISTO is to make sure that eligible persons paid less tax on their super concessional contributions than on their take-home pay. For more information on LISTO, please see here.
- Excess Concessional Contributions Cap
When contributions made by the Members of the Fund exceed the concessional contributions cap (general cap of $25,000 per annum), an additional tax is applied to the Members.
From 2017 onwards, if your contributions exceed the cap, the excess amount may be taxed at penalty rate and treated as non-concessional contributions.
From 1 July 2018, Members can make ‘carry-forward’ concessional super contributions if their total superannuation balance is less than $500,000 at the end of 30 June in the previous year. Members can access their unused concessional contributions caps on a rolling basis for five consecutive years. Unused amounts are available for a maximum of five years and will expire after this.
The first year in which Members can access unused concessional contributions is the 2020 financial year.
- For more information on contributions, please refer to the ATO Website.
- Timing of Contributions
Generally, a contribution is recognised and recorded in the year when cash is received by the SMSF. Taxation Ruling 2010/1 provides direction with respect to timing of contributions.
- For more information on taxation in Super, please see here.