From July 2017, the general concessional contributions cap dropped from $30,000 to $25,000 and the special cap for older Australians ($35,000) was abolished. From July 2018 until 30 June 2019 (2018/2019 year), the annual concessional contributions cap remains at $25,000, rather than increasing.
A concessional contribution is a before-tax contribution made by your employer (typically in the form of Superannuation Guarantee or salary sacrifice contributions), or made by you, as tax-deductible super contributions (for more information on the concessional contributions rules, see SuperGuide article Super concessional (before-tax) contributions: 2018/2019 survival guide).
The concessional contributions cap is frozen for the 2018/2019 year due to the indexation rules applicable to the cap.
Likewise, the non-concessional contributions cap dropped from $180,000 to $100,000 from July 2017, and remains at $100,000 for the 2018/2019 financial year. A non-concessional contribution is an after-tax contribution that has already had income tax paid on it, or is from non-taxed income (for more information on the non-concessional contributions rules, see SuperGuide article Your 2018/2019 guide to non-concessional (after-tax) contributions).
The indexation of the non-concessional (after-tax) contributions cap is linked to the indexation of the concessional (before-tax) cap. The non-concessional contributions cap is frozen due to the indexation rules.
If the contributions caps are indexed, why aren’t they increasing for the 2018/2019 year?
The annual $25,000 concessional contributions cap is to be indexed periodically, in $2,500 increments, rounded down to the nearest multiple of $2,500. Indexation will be in line with the annual increase in full-time average weekly ordinary time earnings (AWOTE).
The annual $100,000 non-concessional contributions cap will be indexed in $10,000 increments, in line with the indexation of the concessional (before-tax) contributions cap.
Since wages growth has been minimal, and wages would need to grow 10% for the concessional contributions cap to increase to $27,500, Australians are still subject to a $25,000 concessional cap, and hence still subject to the $100,000 non-concessional cap, for the 2018/2019 financial year. The ATO has confirmed this status quo.
Wages growth has been glacial in Australia, and indexation for the contributions is based on the previous calendar year’s movements in AWOTE (June 2017, and December 2017 movements). Based on our calculations, AWOTE has only increased 2.36%, which means if this level of wages growth continues, we will have a $25,000 concessional cap for at least 3 more years. For more information on AWOTE indexation, see ATO page Average weekly ordinary time earnings (AWOTE).
Note: For all of the latest superannuation rates and thresholds, see SuperGuide article Superannuation rates and thresholds for 2018/2019 year (and earlier years).
2017/2018 Contributions Guides
Click on the links below to access SuperGuide’s contributions guides:
- Super concessional contributions: 2017/2018 survival guide
- Your 2018/2019 guide to non-concessional (after-tax) contributions
- Cashing in on the co-contribution rules (2018/2019 year)
Further information on concessional contributions
The following SuperGuide articles explaining concessional contributions, may also be of assistance:
- Cut to concessional contributions caps: the back story
- Super opportunity: Catch-up concessional contributions from July 2018
- Employer super contributions: SG rate 9.5% for 2018/2019 year
- Superannuation and employees: 10 facts about your super entitlements
- Concessional contributions cap: A quick guide (10 Q&As)
- Salary sacrifice and super: A guide for employees and employers
- Concessional contributions: What form do I use to claim a tax deduction?
For more information on non-concessional contributions…
For more information on the rules applicable to non-concessional contributions, see the following SuperGuide articles:
- New normal: $100,000 non-concessional contributions cap
- Non-concessional contributions: 10 facts about the $100,000 cap
- Bring-forward rule: A definitive super guide
- For over-65s: Ten tips when making super contributions
- Understanding the transitional bring-forward rule (for 2018/2019 and 2017/2018 years)
- Super contributions: Bring-forward rule and your Total Superannuation Balance
- Total Superannuation Balance: 7 reasons why your TSB matters