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Super Contribution Caps Set to Increase on 1 July 2024

As the end of the financial year approaches, Australians will soon have an opportunity to significantly boost their retirement savings thanks to the upcoming increase in super contribution caps, effective from 1 July. While there are a number of different routes through which you can add value and funds to your retirement, additional super contributions offer a structured, and potentially tax-efficient way to do so. Let’s recap the two main contribution types, and how you can take advantage of the increased caps to secure your dream retirement lifestyle.

What are Concessional Superannuation Contributions?

Concessional contributions are before-tax super payments (either via ongoing salary sacrifice or a lump sum tax-deductible contribution) capped annually to limit the tax benefits associated with superannuation. The current annual cap is $27,500 and includes compulsory employer contributions and voluntary salary sacrifices. Monitoring your contributions is crucial to avoid surpassing this limit, especially for individuals with multiple jobs or super funds, as exceeding the cap incurs additional taxes. Concessional contributions are taxed at 15% for those earning under $250,000 per year or 30% for those earning more than $250,000 per year.

What are Non-Concessional Superannuation Contributions?

Non-concessional contributions are after-tax super payments, with the cap set at four times the concessional contributions cap. Currently this cap is $110,000 annually. These contributions provide a tax-efficient way to boost your super balance, with the possibility of employing the ‘bring forward rule’, which provides the opportunity to contribute up to 3 years’ worth of non-concessional contributions in just 1 year, subject to your total super balance and other criteria.

What are the New Super Contribution Caps?

The upcoming financial year introduces higher caps for both concessional and non-concessional contributions in line with average weekly ordinary earnings (AWOTE). The concessional cap will increase from $27,500 to $30,000, and non-concessional from $110,000 to $120,000. These increases allow individuals to contribute more to their superannuation, potentially lowering their taxable income and enhancing their retirement savings. Additionally, the bring forward rule will be adjusted to reflect these changes in caps, offering additional opportunities to make substantial contributions over a short period.

Why Should I Consider Additional Super Contributions?

Additional super contributions can significantly impact your retirement lifestyle by not only increasing your super balance, but also providing great tax advantages – and increased caps add to these benefits. For those under the $500,000 super balance threshold (this balance reduces to $300,000 for those under 67), unused concessional cap amounts from the previous 5 years can be used, allowing for larger contributions without breaching the cap. It’s a strategic move to consider, especially with the impending Stage 3 tax cuts, which might affect the tax benefits of future contributions.

McKinley Plowman – Helping You Secure the Retirement You Desire

The increase in super contribution caps is fantastic for Australians looking to secure their financial future with the means to do so. By understanding the types of contributions and the new limits, you and your financial adviser can strategically plan your contributions to maximise your retirement savings. Given impending tax changes and the implementation of these new caps, the time to act is now.

As always, seeking professional advice ensures that these strategies align with your personal financial situation, overall financial plan, and your retirement goals. The Wealth team at McKinley Plowman can help you u understand how additional super contributions now can have a positive impact when it comes time to retire – you can reach us on 08 9325 2411 (Perth), 08 9301 2200 (Joondalup), or via our website.

Please note the information provided within this article is general of nature and is not a personal advice recommendation. Prior to considering strategies discussed in this article we recommend you seek personal financial advice. Please be aware that, without the benefit of financial advice, you may be committing yourself to financial strategies or products that are not appropriate for your overall personal situation, needs and objectives.

Further reading: Understanding concessional and non-concessional contributions | Australian Taxation Office (ato.gov.au)

written by:

Justin McMillan

Financial Adviser Justin McMillan has been with McKinley Plowman for several years, following our acquisition of his practice Smartwealth. He firmly believes that while financials, investments, and strategies are important in an individual's financial plan, they are simply the vehicles to allow clients to get where they want to be. Justin takes a holistic and rounded approach and focuses on the individual, taking the time to listen and understand what drives and motivates his clients.