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More money for living the retirement dream? Here’s what you need to know

The caps on what you can contribute to your super are changing - just in time to take advantage of tax changes.

Your superannuation will hopefully make a big difference to your ability to live your life on your own terms. Did you know you can contribute to it beyond your Superannuation Guarantee contributions (aka the 11% your employer pays of your ordinary time earnings into your super fund)?

The amount you could contribute is also about to increase – after all, the same money doesn’t buy what it used to (thanks to high inflation). Of course, this all ties in nicely with tax changes later this year too - maybe you might have extra money next year burning a hole in your pocket?

So, here’s a quick guide to contributions and the coming changes:

Before-tax super contributions:

Known as concessional contributions, your Superannuation Guarantee contributions are part of this. It is simply payments made to your superannuation from your salary before tax – and other than Superannuation Guarantee payments, could also be salary sacrifice payments, other amounts an employer agrees to pay as part of your contract, personal payments you choose to make, or amounts transferred from a foreign super fund.

A 15% tax applies to these contributions, rather than your usual marginal tax rate – unless you earn over $250,000 per annum where an additional 15% tax may apply.

Currently, the maximum you can contribute through this format is $27,500 per year – but from 1 July 2024, this will increase to $30,000 per year. (As a side note, this was actually the cap around 8 years ago before it was reduced to $25,000 in 2017.)

Concessional contribution cap 2023/2024 - $27,500

Concessional contribution cap 2024/2025 - $30,000

If your Superannuation Guarantee amounts are below the cap, you could make your own additional payments up to that max.

A basic example is below:

Superannuation Guarantee 2023/2024 - $5,000

Unused concessional cap 2023/2024 - $27,500 - $5,000 = $22,500

There is also a “carry forward” provision that allows you to carry forward unused cap amounts from up to five years previously, if your total superannuation balance is below $500,000.

After-tax super contributions:

Known as non-concessional contributions, these are amounts you can pay to your superannuation after you’ve paid tax on your income, provided your total super balance is below what is known as the general transfer balance cap, which is currently $1.9 million.

The current cap on these contributions is $110,000 per financial year and this will increase after 1 July 2024 to $120,000 per financial year.

Non-concessional contribution cap 2023/2024 - $110,000

Non-concessional contribution cap 2024/2025 - $120,000

You can also ‘bring-forward’ non-concessional contributions, rolling together 3 years’ worth of contributions – so from 1 July 2024, you could roll together up to $360,000 in non-concessional contributions.

A few other contributions to know about….

Down-sizer contributions:

Thinking of downsizing the big family home for that lifestyle apartment you’ve been eyeing? You could contribute up to $300,000 from the proceeds of the sale of your home into your superannuation fund if you are aged 55 or older. That is – provided your superannuation is below the general transfer balance cap of $1.9 million and you have owned your home for more than 10 years.

It’s a one-off payment and is considered a non-concessional contribution – but doesn’t count towards the cap on non-concessional contributions.

Spouse super contributions:

There are two options for you to give your spouse’s super a leg-up.

  1. Super-splitting – where you split contributions you have made into your super across into your spouse’s super. You can do this by making an application at the end of the financial year.
  2. A direct super contribution – where you make a direct non-concessional contribution to your spouse’s superannuation account (which counts towards their non-concessional contribution caps). If your spouse earns below $40,000, you might be able to claim a tax offset of up to $540 for this.

Government super contributions:

There are two types here for lower-income earners.

1. Super co-contribution – if you earn below $58,445 before tax for the 2023/2024 tax year and make a personal super contribution, the government may make a co-contribution of up to $500. Read more.

2. Low-income super tax offset – if you earn below $37,000, you may receive a refund into your superannuation of the tax paid on your concessional contributions up to a cap of $500.

Please remember that you are welcome to contact us at any time if have any questions about what you have read in this article.