Concessional Contributions Explained

Concessional contributions are before-tax contributions, which are taxed at a maximum flat rate of 15%. They include employer contributions, salary sacrifice contributions and personal deductible contributions. When making concessional contributions, you must ensure you do not exceed your annual concessional contribution limit which is $25,000 for the 2020/21 financial year.  If you think that making additional contributions might push you over this cap, please call our Member Care Team on 1300 360 907, or email members@christiansuper.com.au to check before you make any additional contributions.

There are a couple of different ways you can make additional concessional contributions: salary sacrificing and personal deductible contributions.

 

Salary sacrificing

Salary sacrificing into your super is done through your employer, where they pay a  percentage of your pre-tax salary as an additional concessional contribution to your super account. This arrangement enables you to pay 15% contributions tax on the amount you contribute rather than your marginal tax rate (21%, 34.5%, 39% or 47% including 2% Medicare Levy) depending on your taxable income.

For example, Ben is 60 years old, earns $70,000 taxable income and salary sacrifices $10,000. He will save nearly $2,000 in tax (i.e. 32.5% + 2% Medicare Levy – 15%) x $10,000 = $1,950.

Note that there is no tax benefit in salary sacrificing additional super contributions if you do not pay tax (generally if your taxable income is less than $21,885).

 

Personal deductible contributions

Alternatively, you may choose to make personal deductible contributions (also known as voluntary after-tax contributions), which may help you achieve the same result as salary sacrificing if you then claim a tax deduction. This method involves using funds in your bank account rather than asking your employer to make additional contributions, and submitting a form to claim the tax deduction.

How to claim a tax deduction

To claim a tax deduction on your voluntary after-tax contributions, you will need to take the following steps.

  1. Make an after-tax contribution to your super account before 30 June

Remember that there is a $25,000 concessional contribution cap for the 2020/21 financial year. If the combined total of employer contributions, salary sacrifice contributions and personally deductible contributions that are received by your super fund exceeds this cap, you may have to pay additional tax.

You can also use the catchup contribution rule where you contribute more than $25,000 if your superannuation balance is less than $500,000 and you have not used your $25,000 limit in previous financial years.

  1. Lodge a Notice of Intent Form with Christian Super

You’ll need to lodge a Notice of Intent Form with us. This is a form from the Australian Taxation Office (ATO) which allows you to claim or vary a tax deduction for personal super contributions. Complete the form, and send to Locked Bag 5073, Parramatta NSW 2124. If you’d like to make your contribution via BPAY, your BPAY details can be found by logging into your online MemberAccess account. We will acknowledge the form and payment in writing.

  1. Have your paperwork in order when you do your tax return

After 30 June, you can lodge your tax return using the written acknowledgement you have received from Christian Super which confirms the amount that you wish to claim as a tax deduction. You have until 31 October to lodge your tax return for the previous financial year, though you may have more time if you use a registered tax agent.

Continue reading about Non-Concessional Contributions

This is part of our 3-part series on contributions. Click on the links to read more:

  1. Your Guide to Super Contributions
  2. Concessional Contributions Explained
  3. Non-Concessional Contributions Explained