Generally, are contributions made into your SMSF that are included in the SMSFs assessable income. The most common types are employer contributions and personal contributions that you or your employer claims as an income tax deduction. Employer contributions include super guarantee contributions and salary sacrifice contributions. These contributions are taxed at a lower 'concessional' rate of 15% which is often referred to as 'contributions tax'.
Concessional Contributions are subject to a yearly cap – currently $25,000 a year. For people 50 or over, the transitional cap is $50,000 per financial year, until 30 June 2012 provided their superannuation balance is less than $500,000 . Therefore, this new cap will increase as the standard concessional cap is indexed. Contributions over the cap are subject to excess concessional contributions tax.
Excess concessional contributions tax is 31.5% on concessional contributions over the cap. The ember is personally liable for this tax, but can ask their super fund to release money to pay it.
Generally, are contributions made into your SMSF that are not included in the SMSFs assessable income. The most common type are personal contributions, that are not claimed as an income tax deduction.
Non-Concessional contributions are subject to a year cap of $150,000 or $450,000 over a three-year period. The non-concessional contributions cap is always three times the concessional contributions cap. A tax of 46.5% is levied for non-concessional contributions over the cap. Individual members are personally liable or this tax and need to have their super fund release an amount of money equal to tax. Non-concessional contributions also include excess concessional contributions for the financial year. They don't include super co-contributions, structured settlements or orders for personal injury, CGT related payments under the CGT cap and rollovers.
Means employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment for 40 hours in a period of not more than 30 consecutive days in that income year, before the contribution is made. Gain or reward means you received remuneration such as wages, business income, bonuses and commissions in return for personal exertion from these activities. It does not include gaining passive income such as rent or dividends.
Employment on a full-time basis
Means gainful employment for at least 30 hours each week.
Employed on a part-time basis
For the purposes of the fund accepting contributions, means has been gainfully employed for at least 40 hours in a period of not more than 30 consecutive days in that financial year. The term 'gainfully employed' basically means 'employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment. Refer to SIS Regulations 7.04 and 1.03(1)
Avoid the 'work test' under the 3-year averaging rule
A 65 year old fund member can effectively avoid the 'work test' by making a $450,000 non-concessional contribution under the three-year averaging rule in the year they turn 65, provided the contribution itself is actually made prior to the individual turning 65 years of age. In these circumstances, the 'work test' is not required to be satisfied because the taxpayer has actually made the contribution prior to turning 65 years of age.