Increased super contributions caps from 1 July 2024

This may create an opportunity to further boost your super and reduce your tax.

Following the release of the latest Average Weekly Ordinary Time Earnings (AWOTE) index, the new caps have been confirmed as:

• The concessional contribution cap will increase from $27,500 to $30,000. These pre-tax contributions include compulsory employer contributions, salary sacrifice and any other contributions you claim a tax deduction for.
  
• The non-concessional contribution cap will increase from $110,000 to $120,000. These are after-tax contributions that you do not claim a tax deduction for.
  
• The maximum non-concessional cap available under the bring-forward provision will increase from $330,000 to $360,000. In short, you can 'bring forward' your cap for future years to contribute three years' worth of cap space at once. This limits your ability to again use this method for the remainder of those three years.
  
• The total superannuation balance (TSB) cap will increase from $1,700,000 to $1,900,000. In short, if you're above this threshold you can no longer make non-concessional contributions, and if your total super balance (individually) is above $1,660,000 you'll have a reduced capacity to make non-concessional contributions.

If you intend to make additional 'catch-up' concessional contributions this financial year by using unused cap amounts from previous years to claim a larger tax deduction, the amount will not be affected by indexation as the higher $30,000 cap does not come into play until the financial year 2025. To make catch-up concessional contributions this year, you must have had less than $500,000 in super on June 30, 2023. It's important to note that where you’ve got an unused amount from 2018-19, as unused cap amounts can only be carried forward for up to five years, and this is the last financial year to use it – so, use it or lose it. Also, it may be more tax-effective to minimise taxable income this financial year than next with the stage three tax cuts coming in.

In addition to the adjusted contribution caps and thresholds outlined above, several other thresholds will also be impacted including:

• From July 1, the compulsory employer superannuation guarantee (SG) rate also increases to from 11 per cent to 11.5 per cent. So, if you’re a salary or wage earner, the opportunity to make increased voluntary concessional contributions from the indexation of the cap will be partly absorbed by the increase in your employer’s SG contributions.
  
• The eligibility threshold for the government co-contribution of $500.
  
• The CGT contribution cap (which applies following the sale of eligible small business assets).
  
• The low-rate cap (which impacts how much you can draw from your super tax-free before 60).
  
• Redundancy tax-free thresholds.
  
• The General Transfer Balance Cap, which is indexed according to movements in the Consumer Price Index (CPI), had already been confirmed as remaining set to $1.9 Million for the 2024-25 financial year.

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Reach out to your adviser directly if you've got questions about how you can smartly navigate the pending changes to super - otherwise they'll be in touch with you at the right time.