Starting from July 1st, 2024, there will be an increase in the maximum amount you can contribute to your superannuation. We’ll guide you on how to make the most of this change.

Contribution limits for superannuation will rise from $27,500 to $30,000 for concessional contributions and from $110,000 to $120,000 for non-concessional contributions, effective July 1st, 2024. These caps are adjusted in accordance with the growth in wages, as measured by the average weekly ordinary times earnings (AWOTE) of the preceding year’s December quarter. The recent notable growth in wages has prompted the first increase in contribution caps in three years.

Other areas impacted by indexation include:

  • The Government super co-contribution – Income threshold
  • The super guarantee maximum contribution base (the limit for compulsory super guarantee payments)
  • The tax-free thresholds for redundancy payments
  • The CGT contribution cap (amount that can be contributed to super following the sale of eligible business assets)

For individuals with available income to spare, superannuation presents an appealing option, boasting a 15% tax rate on concessional super contributions and the potential for tax-free withdrawals upon retirement. For business proprietors experiencing a prosperous year or concluding a business sale, capitalizing on this opportunity to bolster their superannuation holdings is advisable. However, strategic timing of contributions becomes crucial for optimizing outcomes.

If you anticipate a capital gains tax obligation in a given year, employing ‘catch-up’ contributions allows you to make larger-than-normal contributions. Utilising the associated tax deduction can effectively mitigate your capital gains tax liability. But, this strategy will only work if you meet the eligibility criteria to make catch up contributions and you lodge a Notice of intent to claim or vary a deduction for personal super contributions, with your super fund.

Optimising the timing of your contributions can significantly enhance your tax position. For those anticipating a capital gains tax event, utilising ‘catch-up’ contributions can be a strategic move. This approach allows for larger contributions that boost your super balance and offer a tax deduction that can mitigate your capital gains tax liability. It’s essential to meet the eligibility criteria and notify your super fund with a Notice of Intent to claim a deduction for these contributions.

Using the ‘Bring Forward Rule’

Under the bring forward rule, you have the option to consolidate up to two years’ worth of upcoming non-concessional contributions into the current year, provided your total superannuation balance allows it and you are under the age of 75.

If you activate the bring forward rule prior to June 30th, the maximum allowable contribution is $330,000. However, delaying the activation of the bring forward rule until or after July 1st increases the maximum contribution under this provision to $360,000.

Catch Up Contributions

If your super balance is below $500,000 on the prior 30 June, and you want to quickly increase the amount you hold in super, you can utilise any unused concessional super contributions amounts from the last 5 years.

Let’s look at the example of Gary who has only been using $15,000 of his concessional super cap for the last few years. Gary’s super balance at 30 June 2023 was $300,000, so he is well within the limit to make catch 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 ? ?

Gary could access his $27,500 concessional cap for 2023-24 plus the unused $55,000 from the prior 5 financial years. If Gary doesn’t access the unused amounts from 2018-19 by 30 June 2024, the $10,000 will no longer be available.

Transfer balance cap unchanged

The transfer balance cap which limits the amount of capital that can be transferred into a tax-exempt retirement phase will not increase for the 2024–2025 income year, based on the release of December 2023 consumer price index (CPI) numbers from the Australian Bureau of Statistics (ABS). This means the figure will remain at $1.9 million for the 2023–2024 and 2024–2025 income years.

The transfer balance cap is a lifetime limit on the amount an individual can transfer into one or more retirement phase accounts. Individuals will have a personal transfer balance cap equal to the general transfer balance cap when a retirement phase income stream is commenced for the first time. For example, if an individual commences a retirement stream in the 2024–2025 income year, their personal transfer balance cap will be $1.9 million.

For individuals who started their retirement phase income stream in an earlier year with a lower general transfer balance cap, if the full amount of the personal transfer balance cap was never used, proportional indexing may apply. This means the individual’s personal transfer balance cap will be indexed based on the highest ever balance in the transfer balance account.

Where an individual exceeds their personal transfer balance cap, the excess is required to be commuted and excess transfer balance tax needs to be paid.

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