Contributions Over the Caps: What You Need to Know

  • When it comes to building your superannuation, there’s a fine balance between maximising your contributions and avoiding unintended tax consequences.
  • That balance is governed by annual contribution caps, limits on how much you can contribute to your super each year.
  • For any superannuation members, understanding and managing these caps is critical as exceeding the caps can result in significant penalties.

 

There are two core types of super contributions:

  1. Concessional Contributions (Before-Tax) 
  • These are contributions made from income before tax and include:
  • Employer Super Guarantee (SG) – currently 12% of ordinary time earnings
  • Salary sacrifice contributions
  • Personal contributions that you claim a tax deduction for
  • Certain reserve transfers, if applicable

Tax treatment:

  • Taxed at 15% upon entering super.
  • If you’re aged 67–74, you’ll need to meet the work test to claim deductions (i.e. work 40 hours within a 30-day period in the financial year).

 

  1. Non-Concessional Contributions (After-Tax)
  • These are contributions made from income you’ve already paid tax on and for which no deduction is claimed. Typical examples include:
  • Personal contributions not claimed as deductions
  • Contributions from a spouse
  • Contributions for children under 18
  • Transfers from foreign super funds not assessable in Australia
  • Since 1 July 2022, individuals aged 67–74 no longer need to meet the work test to make non-concessional contributions.

 

Contribution Caps for 2025/26

Concessional: Annual Cap= $30,000, Eligibility= All eligible contributors

Non-Concessional: Annual Cap= $120,000, Eligibility= TSB < $2 million

TSB < $2 million: Annual Cap= $0, Eligibility= TSB ?$2 million (not allowed)

TSB = Total Superannuation Balance as at 30 June of the previous financial year

 

What Happens If You Go Over the Caps?

 

Excess Concessional Contributions

If you exceed the $30,000 concessional cap:

  • The excess is added to your assessable income and taxed at your marginal rate
  • A 15% tax offset is applied (as your fund already paid contributions tax)
  • You are personally responsible for the tax payable
  • The ATO will issue a Determination Notice after your SMSF Annual Return is lodged

You have two options:

  • Option 1: Leave It in Super

Excess is reclassified as a non-concessional contribution

If your TSB is ?$2 million, this may breach the non-concessional cap (which could trigger even more tax)

Not available if you’ve already hit your Transfer Balance Cap

  • Option 2: Release Up to 85% of the Excess

Up to 85% of the excess can be withdrawn to help cover the tax

This amount won’t count toward your non-concessional cap

Election must be made within 60 days via ATO Online Services or a paper form

Wait for the ATO’s Digital Release Authority before releasing funds

Elections are final and cannot be changed once submitted

 

Excess Non-Concessional Contributions

If you exceed the $120,000 non-concessional cap, the ATO will send you a Determination with two options:

  • Option 1: Release the Excess + Earnings

Withdraw the excess amount and related earnings

Earnings are taxed at your marginal tax rate, with a 15% offset

Avoids the 47% excess contributions tax

Election must be made within 60 days

No funds may be released until the Digital Release Authority is issued

This is usually the more tax-efficient choice.

  • Option 2: Leave It in Super (Not Recommended)

You’ll be hit with a 47% tax on the entire excess

Since this is after-tax money, the effective tax rate may exceed 90%

You cannot reverse this decision later

Only suitable in rare strategic scenarios

 

  • Carry-Forward Concessional Contributions

Since 1 July 2018, members can carry forward unused concessional contributions for up to five years if:

  • Their TSB is under $500,000 as at 30 June of the previous financial year
  • They have unused cap amounts from the past five financial years
  • These rules began from the 2018–19 financial year. Any unused caps must be used within five years or they expire.

If your SMSF deed doesn’t yet include this provision, it’s worth reviewing. Our standard trust deed includes carry-forward rules (see Clause 60), and we can help update yours to stay compliant and flexible.

 

Final Thoughts

Staying under your contribution caps is more than just a compliance exercise, it’s about maximising the benefits of your super while avoiding unexpected tax penalties.

For SMSF trustees and advisers alike, understanding these rules is key to effective planning and long-term success.

If you need help reviewing your SMSF contributions, tracking your caps, or updating your deed, reach out, we’re here to help you stay ahead.

 

General advice disclaimer / General Advice warning: the information in this article is general in nature, it is not advice specific to your needs. If you want to act upon the information in this article then you should seek advice from a qualified professional. VJC Wealth accepts no liability to any party for acting from this information unless they have sought advice in a formal engagement for this purpose