Superannuation: What is the non-concessional contributions cap rule?

We all want to head into those golden years of retirement with a healthy superannuation balance.

There are two ways to boost your super, and it’s important to understand the tax rules which govern each.

Concessional contributions, such as compulsory employer contributions and salary sacrifice, are made from pre-tax income, while non-concessional contributions (NCCs) are voluntary payments made from your after-tax income or savings.

When it comes to your superannuation strategy, it helps to understand how non-concessional contributions (NCCs) work, including its associated cap.

What is the non-concessional contributions (NCCs) cap?

The Australian Taxation Office (ATO) has a cap, indexed in line with average weekly ordinary time earnings, on the amount of non-concessional contributions you can make to your super without having to pay extra tax.

Common examples of NCCs are personal contributions you make that are not claimed as a tax deduction and personal contributions made by your spouse.

If you withdraw money from your super and deposit it back in later, this amount counts as a new non-concessional contribution unless claimed as a tax deduction.

If you exceed the concessional contributions cap, the excess contributions will also count towards your NCCs cap.

If you have multiple super funds, all non-concessional contributions you make to all your funds in a financial year count towards your NCCs cap.

Personal injury payments, downsizer contributions from the proceeds of your home sale, contributions that count towards your capital gains tax cap that have not exceeded your lifetime limit, and the re-contribution of COVID-19 early release superannuation amounts do not count towards your NCCs cap.

What is the current non-concessional contributions (NCCs) cap?

The non-concessional contributions cap for the 2021–22 and 2022-23 financial years is $110,000, but your own cap may be different.

Your individual cap depends on your total super balance on June 30, 2022, your age and other factors. Your cap can be higher if you use the bring-forward arrangements.

At any point during the financial year, people aged under 75 with a super balance of less than $1.48 million may be able to bring forward two years’ of after-tax super payments, allowing you to contribute up to three times the cap ($330,000) at once or at any time during the three financial years. The bring-forward arrangements then decrease for super balances between $1.48 million and $1.7 million.

Your NCCs cap is nil if your total super balance is greater than or equal to the general transfer balance cap ($1.7 million for 2021–22 and 2022-23) or if you are aged 75 or older.

What happens if you exceed the NCC cap?

Super funds do not monitor contribution caps, so it’s up to you to track your contributions to ensure you don’t exceed your NCCs cap.

The ATO will inform you if you exceed the cap. If this happens, you can withdraw the excess contributions and 85 per cent of the associated earnings.

If you do not withdraw the excess funds, they will be taxed at the top marginal rate (47 per cent).

You must lodge a tax return for that year if you exceed your NCCs cap.

How do you check your NCC cap amount?

You can keep track of the amount of non-concessional contributions you, your employer, or others make on your behalf in the ATO’s online services via myGov.

If you pay money into more than one super fund, include all amounts when working out your annual contributions.

You can also see your bring-forward arrangement information in the ATO’s online services. Contributions count towards the cap in the year your super fund receives them.

Need help navigating your super?

At LDB group, we’ll help you make the most of your superannuation to ensure you are financially secure in retirement.

Call us on (03) 9875 2900 or fill in the contact form below to speak with one of our experts.