Starting on 1 July 2024, there will be an opportunity to enhance your superannuation contributions. Let’s explore how you can benefit from this upcoming change.
Come 1 July 2024, the contributions you can make to your superannuation will rise. The ceiling for concessional super contributions will go from $27,500 to $30,000, and for non-concessional contributions, it will escalate from $110,000 to $120,000.
This adjustment in contribution limits corresponds with the growth in wages, specifically referencing the December quarter’s average weekly ordinary times earnings (AWOTE) of the previous year. The substantial wage increase has prompted this cap rise, the first of its kind in three years.
Indexation also affects other financial thresholds including:
- The Government super co-contribution – Income threshold
- The super guarantee maximum contribution base
- The exempt limits for redundancy pay
- The capital gains tax (CGT) super contribution limit
For individuals who have the means to make extra contributions, the allure of superannuation is strong, offering a 15% tax on concessional contributions and the potential for tax-free disbursements upon retirement. For business proprietors who’ve had a successful year or have sold their enterprise, this presents a chance to contribute more to their super. Nonetheless, strategic timing of contributions is essential for optimising benefits.
Should you anticipate a capital gains tax responsibility for a certain year, ‘catch up’ contributions are available to make more substantial contributions than usual, utilising the tax deduction to mitigate the capital gains tax. This approach, however, hinges on meeting the criteria for ‘catch up’ contributions and submitting a Notice of intent to claim or vary a deduction for personal super contributions to your super fund.
Implementing the Bring Forward Rule
The bring forward rule allows you to accelerate up to two years’ worth of non-concessional contributions. This is contingent on your total super balance permitting the contribution and being under 75 years of age. By applying this rule before 30 June, you can contribute a maximum of $330,000. If triggered on or after 1 July, however, you could contribute up to $360,000.
‘Catch Up’ Contributions
If your super balance is under $500,000 as of the preceding 30 June, and you’re targeting an expedited increase in your super holdings, you can apply any unconsumed concessional super contribution limits from the past five years.
Consider Gary’s scenario, who over the last several years, has only contributed $15,000 annually, using a portion of his concessional cap. With a super balance of $300,000 as of 30 June 2023, he’s well-positioned to make ‘make-up’ contributions.
| Concessional Cap | Used | Unused | |
|---|---|---|---|
| 2018-19 | $25,000 | $15,000 | $10,000 |
| 2019-20 | $25,000 | $15,000 | $10,000 |
| 2020-21 | $25,000 | $15,000 | $10,000 |
| 2021-22 | $27,500 | $15,000 | $12,500 |
| 2022-23 | $27,500 | $15,000 | $12,500 |
| 2023-24 | $27,500 | ? | ? |
Stable Transfer Balance Cap
The standard limit for the transfer balance cap (TBC), which caps the amount you can shift into a retirement account with tax exemption, will stand at $1.9 million for the fiscal year 2024-25. Annually, the TBC is indexed to the December consumer price index (CPI).
