The latest adjustments to superannuation contribution caps present a prime opportunity to enhance your super balance while optimising your tax position.
Contribution Cap Changes
With the release of the recent Average Weekly Ordinary Time Earnings (AWOTE) index, significant changes to the contribution caps have been announced, effective from the upcoming financial year:
- Concessional Contribution Cap Increase: The cap for pre-tax contributions, including mandatory employer contributions, salary sacrifices, and any contributions for which you claim a tax deduction, will rise from $27,500 to $30,000.
- Non-Concessional Contribution Cap Rise: The cap for after-tax contributions, which don’t offer a tax deduction, is set to increase from $110,000 to $120,000.
- Expansion of the Bring-Forward Provision: This allows for the advance contribution of up to three years’ worth of non-concessional contributions, raising the limit from $330,000 to $360,000. This strategy is subject to a cooling-off period that prohibits further use of the bring-forward provision for three years.
- Total Superannuation Balance (TSB) Cap Increase: The TSB cap will escalate from $1,700,000 to $1,900,000, beyond which non-concessional contributions are barred, with a phased reduction in contribution capacity starting from a TSB of $1,660,000.
Remember, the updated $30,000 cap doesn't apply until the 2025 financial year.
‘Catch Up’ Contribution Eligibility
For those planning to leverage ‘catch-up’ concessional contributions this year by utilising unused cap amounts from previous years for a more substantial tax deduction, remember, the updated $30,000 cap doesn’t apply until the 2025 financial year.
Eligibility for this year requires having less than $500,000 in super as of June 30, 2023. Notably, this financial year marks the last chance to use unused cap amounts from 2018-19, given the five-year carry-forward limit.
‘Catch Up’ Contribution Eligibility
For those planning to leverage ‘catch-up’ concessional contributions this year by utilising unused cap amounts from previous years for a more substantial tax deduction, remember, the updated $30,000 cap doesn’t apply until the 2025 financial year.
Eligibility for this year requires having less than $500,000 in super as of June 30, 2023. Notably, this financial year marks the last chance to use unused cap amounts from 2018-19, given the five-year carry-forward limit.
What other superannuation related measures will change?
With the introduction of these new caps and thresholds, various other superannuation-related measures will be affected starting July 1, including:
- The superannuation guarantee (SG) rate will increase from 11% to 11.5%, slightly offsetting the capacity for voluntary concessional contributions due to higher compulsory employer contributions.
- Adjustments to the government co-contribution limit, CGT cap for small business asset sales, the low-rate cap affecting tax-free super withdrawals before age 60, redundancy tax-free thresholds, and the General Transfer Balance Cap, which remains at $1.9 million for the 2024-25 financial year following CPI adjustments.
These changes underscore the importance of strategic planning in managing your super and tax implications.
If you have questions or need guidance on how to best navigate these updates, consider reaching out to your adviser. They’re equipped to help you make the most of these changes or will proactively contact you to discuss your strategy.
