Gary Lucas Financial Advice | No. 1 Certified Financial Planner in Byron Bay

Financial Insights



Am I restricted by my Superannuation Limits?


For a growing portion of the Australian population, problems are arising because of the number and levels of restrictions currently in place for Superannuation Contributions.

The $1.6m limit on amounts permitted in tax-free pension accounts is manageable for a couple since both individuals are entitled to the limit. This system can provide each couple with access of to up to $3.2m tax-free within their super funds and the “pension income” they receive is tax-free.

But Superannuation Contributions are challenging due to a minefield of limitations and careful financial planning can make a big difference to your retirement wealth. 

Over the last decade or so, the conditions have moved from being too generous to be overly restrictive; government obsession to deliver Federal Budget surpluses has been at the expense of supporting citizens long-term to save for retirement (and hence reduce reliance on the Government’s Centrelink “Age Pension”). 

In particular, the annual allowance of $25,000 for Concessional Contributions (tax deductible) is very low and at times difficult to manage. Do keep in mind that this limit includes both Superannuation Guarantee Contributions (SGC) deposited by employers, as well as any personal deductible contributions. For some people, it can be easy to accidentally exceed this limit and then incur the tax penalties which apply. 

Non-concessional Contributions (personal and non-tax deductible) are generally limited to $100,000 per year. One trap people can fall into is to contribute at this maximum level and unintentionally exceed the $25,000 Concessional Limit. The excess then spills over to be included as part of the Non-concessional Limit. If you were to exceed both limits, you would be penalised.

Saving for your retirement has its challenges and is not easy!

Some other limits, which may also remind you of some opportunities.

  1. Spouse Contributions. A spouse whose partner has low or no income can contribute up to $3,000 per annum to their other half’s superannuation account. Dependant on taxable income and the amount contributed, Spouse Contributions can entitle the contributor to a rebate of up to $540 or a return of 18%.

  2. Once you have over $1.6m saved in superannuation you are not allowed to deposit any Non-concessional Contributions.

  3. Age-based Limits. There are cut-off points at which you can no longer contribute and also ages at which you must meet certain criteria in order to be allowed to contribute. These start at age 65 although recent federal budget changes will see this entitlement eligibility is extended to older ages. For example, once age 75 is reached, only SGC from employers are permitted. No personal voluntary contributions are allowed.

  4. Opportunities exist both for contribution limits to be carried forward, as well as for catch-up contributions. 

  5. Tax provision “Division 293” is an additional tax charged which actually has the effect of reducing tax concession on Super Contributions for individuals whose income exceeds the limit (currently $250,000).

All of this can be confusing and even overwhelming for some people.

Having money saved in Superannuation has many tax benefits for individuals, so it’s only natural restrictions are enforced so benefits don’t get abused. 

Keep in mind that there are other options to Superannuation. Whilst it is attractive, a more effective result can sometimes be delivered in alternate ways. For example, combining Superannuation Contributions with investments in your own names can utilise personal tax-free amounts while also offering low tax rates. Finally, for people who may be struggling with the Superannuation limits, Insurance Bonds can provide a tax effective option.