The annual superannuation contribution limits, referred to as ‘contribution caps’, are set to increase from 1 July 2024. These caps are subject to indexation in line with average weekly ordinary time earnings (AWOTE) and from 1 July 2024, we will see an increase in both the concessional and non-concessional contribution caps as follows:
| 2023–24 | 2024–25 | |
|---|---|---|
| Concessional | $27,500 | $30,000 |
| Non-concessional | $110,000 | $120,000 |
| Non-concessional (3-year bring forward) | $330,000 | $360,000 |
It’s important that you consider how these changes will affect your personal position and what these changes mean for you in the current financial year and beyond.
To get the best outcome, there are some initial considerations to review before making additional contributions this financial year. These are your age, total super balance and taxable income.
Your age
Knowing how many more years you have remaining to contribute to your superannuation fund is extremely important. This will be determined by the age-based rules that apply to contributions and your age in the year you are looking to make the relevant contributions.
Non-concessional contributions can be made up to age 75.
Non-concessional contributions: Bring forward (three-year rule) – If you’re under age 75 at any time in a financial year you can contribute up to three times the annual general non-concessional cap in that financial year.
If you are approaching age 75, then you may need to make any proposed non-concessional contribution before you turn 75.
Concessional contributions can be made up to age 67 even if you are not working or until age 75 where you meet the work test requirements.
If you are approaching age 67 and not working, then you may need to consider making any concessional contributions sooner rather than later. If these concessional contributions are made before 30 June, the cap will be $27,500.
Also, if you are approaching age 75, then you may need to consider making any relevant concessional contribution while allowed. If this is done before 30 June 2024, then keep in mind that it is the current (lower) contribution cap that will apply. However, concessional contributions made after 1 July would be subject to the higher ($30,000) cap that will apply at that time.
Total super balance
Your total superannuation balance (TSB) affects your ability to make use of certain contribution strategies, so be sure to check your total super balance.
Your TSB on 30 June 2023 affects the contribution strategies you can use this financial year.
Non-concessional contributions – If your TSB was below $1.9 million on 30 June 2023, then you may be eligible to make non-concessional contributions.
Non-concessional contributions made during the current financial year are capped at $110,000. This cap increases to $120,000 per year from 1 July 2024.
So if your TSB is approaching the $1.9 million threshold, you may want to consider making a non-concessional contribution while you can.
That is, if your total super balance as at 30 June 2024 is going to be over the $1.9 million limit, then the current financial year is the last year that you can make non-concessional contributions.
Non-concessional contributions: Bring forward (three-year rule) – If you have already triggered your three-year non-concessional bring-forward period in the last two years, then you are not eligible to access the increase in the non-concessional cap until that current three-year period ends.
Your three-year limit is determined in the year you first triggered the bring-forward rules.
If you are eligible to make use of the three-year bring-forward rules for non-concessional contributions, you will need to decide if you trigger this in the current financial year when the cap is $110,000, therefore allowing up to $330,000 to be contributed, or do you wait until 1 July when the annual cap increases to $120,000 and allow up to $360,000 in non-concessional contributions.
You would need to consider:
- Your age and how long you have to contribute
- How many ‘lots of three-year periods’ you have access to
- Your TSB and whether you will be eligible to make further non-concessional contributions over time.
One strategy to consider if you have the capacity to make a large non-concessional contribution and meet the age and TSB requirements, you could make a concessional contribution of $110,000 in 2023–24 and use the bring-forward arrangement to contribute $360,000 in 2024–25.
Concessional contributions – Your TSB balance doesn’t affect the level of concessional contributions that can be made by you, or for you, each year.
However, if you are looking to make a concessional contribution by using any or all of your unused ‘carry forward’ concessional amounts, then your total super balance on 30 June 2023 must have been below $500,000.
If your TSB was below $500,000 on 30 June 2023 but is likely to be above that level on 30 June this year, you may want to consider making a larger concessional contribution this year while allowed.
Taxable income 2024 and 2025
If you anticipate a significant change in your taxable income next financial year, then you should take this into consideration.
For instance, if your taxable income is going to be significantly lower next year, then it may be worth making use of any unused, carry-forward concessional contributions that you may have access to in the current financial year.
Making use of these unused amounts this year by making a larger concessional contribution could result in a better overall tax outcome.
Alternatively, if your taxable income is going to be significantly higher next financial year, for instance where a capital gains tax event may occur, then delaying larger concessional contributions until next year could provide a more favourable outcome.
Don’t forget to review your ‘likely’ TSB at 30 June this year, keeping in mind that you can only make a larger concessional contribution using your unused amounts if your TSB falls below $500,000 at the prior 30 June.
Other strategies to consider
Spouse contributions or recontribution strategy – If you are thinking about making large, non-concessional contributions, it could be worth thinking about who that contribution should be made for: you or your spouse.
Where possible, it can prove beneficial to have relatively equal spouse super balances. For instance, it would not make sense to have one spouse super balance well above the $1.9 million transfer balance cap and the other spouse balance well below this level.
If you are in this position, consider making the non-concessional contribution for the lower balance spouse.
Review existing salary sacrifice agreements – If you have a salary-sacrifice agreement in place with your employer, you could consider increasing the agreed amount to take into account the increase in the concessional cap.
The information contained in this article is general in nature. Your personal position has not been taken into consideration. You should seek personal advice before taking any action.
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