Concessional Contributions

Concessional Contributions are contributions where a tax deduction has been claimed, either by the Member or by an Employer.  Concessional Contributions include the following Contribution Types:

Employer Contributions
Salary Sacrifice Contributions
Personal Contributions satisfying the 10% Rule

Each Concessional Contribution Type is discussed below:

Employer Contributions

These Contributions are made by your Employer.  Employer Contributions are contributions made by an Employer for the benefit of a SMSF Member commonly known as Superannuation Guarantee Contributions (SGC).  Typically these contributions are made at 9% of your salary income.  Your SMSF can accept these Employer Contributions for Members at any time. This means your SMSF may accept them regardless of your age or the number of hours you are working at that time.

Salary Sacrifice Contributions

These Contributions are made by your Employer on instructions from you.  Salary Sacrifice Contributions are voluntary superannuation contributions made by an Employer to your SMSF over and above their Superannuation Guarantee or award obligations.  These contributions are made to your SMSF instead of to you as an Employee receiving that amount as salary.  For more on Salary Sacrifice Contributions click here.

Personal Contributions where a Tax Deduction is claimed under the 10% Rule

These Contributions are made by you.  Voluntary Personal Contributions that you make to your SMSF, where you claim a tax deduction for the contribution are also Concessional Contributions.  You are only allowed to claim a tax deduction for personal contributions if you satisfy the 10% Rule.  The 10% Rule allows you to claim a tax deduction for super contributions if your employment income divided by your assessable income is less than 10%.  Employment income includes salary sacrifice contributions (but not SGC contributions) plus reportable fringe benefits.  Assessable income includes gross income before deductions and includes salary, investment and business income, net capital gains, salary sacrifice contributions plus reportable fringe benefits.

Example 1:

Assume your salary income from employment is $5,000 and your total assessable income from all sources is $100,000 (predominantly from investment income).  You wish to make a personal contribution into your SMSF of $30,000 and claim this amount as a tax deduction.  In that case you will divide $5,000 / $100,000.  In this case the result of 5% will be under 10% enabling you to claim a tax deduction for the personal contribution of $30,000. 

Example 2:

Alternatively assume your salary income from employment is $100,000 and your total assessable income from all sources is $100,000 (ie your salary makes up all your assessable income).  You wish to make a personal contribution into your SMSF of $30,000 and claim this amount as a tax deduction.  In that case you will divide $100,000 / $100,000.  The result of 100% will exceed 10%.  This means that you cannot claim a tax deduction for the personal contribution of $30,000 in this example. 

Work Test Requirement to make a Concessional Contribution

If you are under age 65 you do not need to pass a Work Test to make a Concessional Contribution into your SMSF.

Maximum Concessional Contributions Allowed

If you are under age 65, the following limits apply per Member for Concessional Contributions made into your SMSF.  The limits apply to the total of your Employer, Salary Sacrifice and Personal Concessional Contributions contributed under the 10% rule. 

Aged Over 50 at anytime during the Financial Year            $50,000
Aged Under 50 for entire Financial Year                                $25,000

Additional to Non Concessional Contributions

The limits detailed above are in addition to any Non Concessional Contributions that you are permitted to make into your SMSF.

Tax on Concessional Contributions

Tax is payable on Concessional Contributions made into a SMSF at the rate of 15%.

ATO Tax Deduction Notice

No documentation is required to be completed if you make an "Employer" or "Salary Sacrifice" Concessional Contribution into your SMSF.  If you make a personal Concessional Contribution into your SMSF under the 10% Rule and in turn claim a Tax Deduction on that Contribution you will need to complete an ATO Tax Deduction Form evidencing the Tax Deduction.  The form can be found here for completion.

All Concessional Contributions are made to the ANZ V2 Plus Account

All Concessional Contributions made by each Member of the SMSF must be deposited into the ANZ V2 Plus Account established for your SMSF.   There is only one ANZ V2 Plus Account established for your SMSF and all Members must deposit Contributions into the same ANZ V2 Plus Account.  It is unnecessary and administratively inefficient to have a separate ANZ V2 Account for each Member.

How ESUPERFUND tracks Concessional Contributions

Each Contribution and Contribution Type must be allocated to a specific Member as part of the annual compliance process.  This is a legal requirement.  Typically the Member making the Contribution and the Contribution Type will be detailed on the ANZ V2 Plus Bank Statement.  To the extent that the narration on the Bank Statement is insufficient, you will be asked to confirm on whose behalf the contributions have been made and the Contribution Type using an annual checklist we send to all SMSF clients each year in July.  You do not need to send us confirmation at the time each Concessional Contribution is made. This information is only required annually and we will guide you through the process and prompt you when information is required from you.  For more visit our Q&A section here.

Excess Concessional Contributions

Excess Contributions over the Concessional Contribution Limit will be subject to Excess Contributions Tax of 46.50% (made up of the 15% Contributions Tax plus a Penalty Tax rate of 31.50%).  This can result in double taxation, with an effective tax rate of 93%!   To avoid this disastrous situation it is vital that you keep track of all your Concessional Contributions.