There are now contribution limits for members making personal (non-concessional) contributions to their super. Limits also apply to employer (concessional) contributions.

Most members making regular fortnightly contributions will not have to worry about exceeding the limits. Remember that the limits apply to each individual so both members and their partner may make contributions up to the limits.

Members who invest a large sum of money into super by a one-off contribution or through regular payments will need to be aware of the limits. For example, Contributory Scheme members who are purchasing service or upgrading past rates of contribution should ensure they do not exceed the limits. Penalty tax will be payable on any contributions above the limits.

The new contribution rules endeavour to make it easier for employers and put responsibility for super back with the members. Under these rules, the member will be penalised for excessive contributions whereas employers will be able to claim a full tax deduction for all contributions to superannuation made on behalf of their employees.

Members who contribute to more than one account will need to ensure their total contributions, across all their super accounts, do not exceed the limit.

• What is the Non-concessional Contributions limit?
• What Non-concessional Contributions count towards the limit?
• What is the Concessional Contributions limit?
• Are there any transitional arrangements?
• How are contributions to defined benefit schemes counted?
• How will I be penalised if my contributions exceed the limit?

What is the Non-concessional Contributions Limit?

Non-concessional contributions limit is $150,000 each person per year

You can make personal (non-concessional) contributions if you are:

• under age 65, regardless of whether you are in paid employment; or
• aged 65 but less than 75 and were employed for at least 40 hours in any period of not more than 30 consecutive days in the financial year in which the contribution is to be made.

If you are aged 75 or over you cannot make personal contributions.

Non-concessional contributions limit of $450,000 over 3 years provided you are under age 65

If you are under age 65 you can 'bring forward' up to two years of non-concessional contributions and make a larger contribution, providing your non-concessional contributions do not exceed a three-year cap of $450,000. If you contribute $450,000 in one year, you cannot make any non-concessional contributions for the following two years.

You will not need to contact RBF to activate the $450,000 'bring forward' rule, simply making contributions in excess of the annual limit will trigger the 3 year limit rule.

Although limits will be indexed, where the $450,000 'bring forward' has been activated, the 2 years future entitlements are not indexed.

People aged 63 or 64 using the 3 year limit will not be subject to work test in either of the following 2 years.

What Non-concessional Contributions count towards the limit?

Non-concessional contributions that count towards the limit include:

• Personal (after-tax) contributions
• Spouse contributions (in the receiving member's account)
• Non-taxable amount of a payment from an overseas super fund
• Excess concessional contributions (above the concessional contributions limit)

Non-concessional Contributions that do not count towards the limit include:

• Concessional Contributions
• Government super co-contributions
• Settlement proceeds from an injury resulting in permanent disability
• Contributions received as a result of a Family Law settlement

What is the Concessional Contributions limit?

The concessional contribution limit will commence 1 July 2007.

Contributions tax of 15% is payable on all concessional contributions.

Concessional contributions limit is $50,000 in any one year

Concessional Contributions included in the limit:

• All employer support and Super Guarantee payments (including employer sponsored productivity payments)
• For funded defined benefit schemes, a notional amount will be calculated to determine concessional contributions using a formula yet to be determined. See section below on defined benefit schemes.
• Salary Sacrifice to any superannuation account

Are there any transitional arrangements?

Special arrangements exist for members who will reach age 50 between now and 30 June 2012.

Once you reach age 50 and are able to satisfy the age requirement, you will be able to make concessional contributions up to $100,000 during each remaining financial year up until and including 2011-12.

How are Concessional Contributions calculated for defined benefit schemes?

Non-concessional (personal) contributions made to defined benefit schemes by members will count towards the non-concessional limit. Salary Sacrifice contributions will count towards a member's concessional limit.

For TASSS & SFCSS defined benefit schemes a formula will be used to calculate the concessional contributions provided by employers each year. These concessional contributions will be referred to as 'notional taxed contributions'. These will need to be combined with any salary sacrifice to determine the total annual concessional contributions made.

The RBF Contributory Scheme is an unfunded defined benefit scheme and the employer does not pay contributions until the member reaches preservation age and retires. Therefore there are no concessional contributions being paid each year from employers into the Contributory Scheme. Members of this scheme will only need to count any salary sacrifice contributions made towards their concessional contributions limit.

How will I be penalised if my contributions exceed the limit?

If you exceed the contributions limits, the ATO will send a tax assessment directly to you for payment. The ATO will include a Release Authority where the payment can be made from your super funds. Strict processing timelines will apply.

Excessive non-concessional contributions will be taxed at the highest marginal tax rate plus Medicare Levy (currently 46.5%) and must be paid from superannuation account balance.

Concessional contributions that exceed the limit will be subject to an additional tax of 31.5% bringing the total tax paid to 46.5% (Contributions tax of 15% will have already been paid).

Excess concessional contributions will also be counted towards the non-concessional contributions limit.

The payment process is as follows:

1. Excessive non-concessional or concessional contributions tax liability incurred

2. ATO issues tax assessment & Release Authority to the individual.

3. Individual presents Release Authority to their super fund.

4. Super funds have 30 days to release funds to the individual or the ATO (as nominated by the individual). Breaches of the 30 day time limit will incur a penalty on the fund.

Where an individual has been assessed as exceeding the concessional contributions cap, they can apply to the ATO for their excess contributions to be disregarded or allocated to another financial year. There will need to be grounds for such a consideration, eg late SG payments from an earlier year pushing this year's contributions over the limit.