(upbeat music)
-: Mike's employer makes compulsory superannuation
contributions to Mike's super fund.
These amounts of deemed concessional contributions.
They are assessable income to the fund
and are taxed at concessional rates,
with the net contribution added to the fund balance.
Mike also makes an after tax contribution to his super fund
and does not elect to claim a tax deduction for the payment.
This amount is deemed a non-concessional contribution.
No taxes payable by the super fund
and the full contribution is added to the fund balance.
The taxable funds superannuation is taxable at three stages,
entry, earning and exit.
Entry refers to when contributions
are made to the superannuation fund.
These contributions can come from many sources,
including employers, individuals,
their spouses and the government.
Two main types of classifications
are: concessional contributions
and non-concessional contributions.
Concessional contributions are deductible to the payer
and their assessable income to the super fund,
but generally taxed at concessional rates.
Concessional contributions are typically made in two ways.
Firstly by the employer.
This can take the form of,
compulsory superannuation contributions,
in line with legislated rates of the employee salary
and subject to minimum and maximum salary amounts.
Any additional contributions required
from an industrial agreement award
or negotiated remuneration package
or via salary sacrifice arrangement
where the employee reduces their salary
and increases superannuation contributions
within their existing remuneration package.
Secondly, by the member.
Here the member needs to notify the super fund trustee
that the amount is a concessional contribution.
The result is that the member claims a tax deduction
for the contribution and the super fund treats
the contributions as assessable income.
However, the amount of concessional contributions
that can be made in the tax year is capped
and concessional contributions
that exceed the cap are penalised.
Taxation of concessional contributions
may be adjusted for low income earners
and high income earners.
Low income taxpayers may be eligible
for the low income superannuation tax offset.
The LISTO effectively refunds the tax paid
on the taxpayers concessional contributions,
up to a maximum amount.
High income earners may be penalised with a higher tax rate
on their contributions.
This surcharge applies once the aggregated income amount
exceeds the relevant threshold in a given tax year.
Non concessional contributions and not deductible
to the payer,
and so not accessible to the superannuation fund.
Non-concessional contributions are generally paid
by taxpayers from after tax funds,
and only once their annual concessional contributions cap
has been reached.
However, even non-concessional contributions
have an annual cap,
subject to certain bring forward provisions
that may apply to certain taxpayers.
Non-concessional payments in excess of the cap
are effectively taxed at the top marginal rate.
In addition to the annual non-concessional
contributions cap, it's important to be aware of,
the superannuation balance cap,
above which no further non-concessional contributions
can be made, and the lifetime capital gains tax cap,
which relates to contributions that have utilised certain
small business CGT concessions.
Non-concessional contributions can also be made,
by the government under the co-contribution scheme,
for lower income earners.
Certain eligibility criteria must be met.
And the co-contribution also has a maximum entitlement
that tapers depending on the taxpayers adjusted income
and the amount they personally contributed.
In addition to the taxpayer and the government,
non-concessional contributions
can be made to a spouse's superannuation fund.
In this situation,
the contributor receives a spouse contribution offset.
Again, certain eligibility criteria exists,
and the offset also has a maximum amount,
that tapers depending on the recipient
spouse's adjusted income.
To recap, contributions can come from many sources,
including employers, individuals, their spouses,
and the government.
Two main types of contributions
are concessional contributions,
and non-concessional contributions.
Concessional contributions are deductible to the payer
and are assessable income to the superannuation fund,
but generally taxed at concessional rates.
Non-concessional contributions
are not deductible to the payer,
and so are not accessible to the superannuation fund.
A range of rules and regulations apply to contributions,
including concessions, caps, penalties and offsets.
And it is important to be aware of all facets
to ensure the most effective
superannuation contribution strategy is employed.