Contribution Caps – the pitfalls
When investigating a Bring Forward strategy, not only is the history of Non-Concessional contribution relevant, but the Concessional contributions made over previous years must be considered. A breach of the Concessional cap will result in the excess contribution being counted under the Non-Concessional Contribution (NCC) Limit. If the excess contribution is overlooked, there is a danger that the NCC limit may be exceeded and the Bring Forward provisions be triggered inadvertently.
So what may impact on the contribution limit?
- The contribution is counted towards the cap when the superannuation fund receives it. For example if the SG contribution for the financial year ending 30 June 2010 is received by the fund on the 4th of July 2010, it will be counted in the cap for 2010/2011.
- Life insurance premiums paid by the employer through superannuation is counted as Concessional contributions.
- Insurance premiums paid by the individual when the policy is set up as a superannuation policy gets counted as Non Concessional contributions.
- The unexpected receipt of a bonus or increase in salary when already salary sacrificing to the limit.
- Reallocating contributions to a later year.