Non-concessional contributions are superannuation payments made from after-tax income. Because tax has already been paid on these contributions, they are not taxed again when deposited into the super fund. These contributions help boost retirement savings beyond employer Superannuation Guarantee (SG) and concessional contributions.
Non-concessional contributions are optional and allow individuals to put extra money into super, often for long-term growth or estate planning purposes. They are particularly useful for people wanting to build their balance faster without the limits of pre-tax contribution strategies.
Advanced
From a technical perspective, non-concessional contributions are subject to an annual cap. In Australia, the cap is currently $110,000 (2023–24). However, individuals under 75 may be able to use the bring-forward rule, allowing up to three years of contributions (currently $330,000) to be made at once.
Eligibility also depends on the member’s total superannuation balance. If the balance is above a set threshold (currently $1.9 million), no further non-concessional contributions can be made. While these contributions are not taxed upon entry, future investment earnings inside super are taxed concessionally, and withdrawals in retirement may be tax-free.
Relevance
- Allows individuals to accelerate superannuation growth using after-tax money
- Useful for estate planning and wealth transfer strategies
- Provides flexibility for those who have maximised concessional contributions
Applications
- Adding lump sums into super from savings or inheritances
- Using the bring-forward rule to maximise contributions before retirement
- Boosting balances to improve retirement income outcomes
- Gifting contributions to a spouse for balance equalisation
Metrics
- Annual and bring-forward contribution amounts compared to caps
- Super balance growth from additional contributions
- Eligibility tests based on total superannuation balance
- Long-term retirement income projections after contributions
Issues
- Exceeding the non-concessional cap leads to excess contribution penalties
- High balances may restrict contribution eligibility altogether
- Locking funds into super means they cannot be accessed until preservation age
- Lack of planning may result in missed opportunities for tax and balance growth
Example
An individual receives a $200,000 inheritance. They use the bring-forward rule to contribute $200,000 as a non-concessional contribution. The money grows within super under concessional tax treatment, helping increase their retirement income potential.
