WEEKLY E-MAIL

26 February 2024

CONTRIBUTION CAP INCREASES FROM 1 JULY 2024

By Karen Maher

This week, the Australian Bureau of Statistics released average weekly ordinary time earnings (AWOTE) data, confirming a rise of 4.5%, seasonally adjusted, for the December quarter. As a result, it has now been confirmed that from 1 July 2024, the caps for annual concessional and non-concessional contributions will increase, as shown below:

The increase to the contribution caps is the first in four years.

Concessional Contributions:

Concessional contributions, often called pre-tax contributions, typically include employer contributions, salary sacrifice contributions, and personal contributions with a tax deduction. These contributions are taxed at 15% upon receipt by the superannuation fund.

Indexation of the contribution cap next financial year means individuals with a superannuation balance of less than $500,000 as of 30 June 2024, are potentially able to contribute up to $162,500 as a concessional contribution next financial year, if they have not made any other concessional contributions into super over the previous 5 financial years.

Non-concessional Contributions:

Non-concessional contributions, also known as after-tax contributions, are made from after-tax money and don’t provide a tax deduction. They are not taxed upon receipt by the superannuation fund.

The non-concessional contribution cap is set at four times the annual concessional cap.

Bring-forward rule

Individuals under 75 years old at any time in a financial year can bring-forward up to two years’ worth of non-concessional contribution cap for that financial year, allowing them to contribute a larger amount without exceeding their cap. This is known as the bring-forward rule.

The increase in the annual non-concessional contribution cap will also increase a person’s limit under the bring forward rule to a maximum of $360,000. However, it is important to note that the cap increase does not apply where the bring-forward rule has been previously triggered, and you are within the bring-forward period (i.e. this year, 2023-24 or last year, 2022-23). In this case, the remainder of the bring-forward period will be based on the non-concessional cap when the bring-forward rule was triggered, less the non-concessional contributions made during that period.

Non-concessional contribution eligibility

To be eligible to make non-concessional contributions, an individual’s Total Super Balance (TSB) must be less than $1.9 million as of the preceding 30 June.

Additional TSB thresholds apply for contributions exceeding the annual cap using the bring-forward rule, detailed in Tables 1 and 2 below.

Table 1: TSB thresholds and bring forward caps for 2023/24

Table 2: TSB thresholds and bring forward caps for 2024/25

Please note that indexation of the contribution caps is determined after applying the latest average wages figures to the legislative formula; however, as of the date of this article, the ATO has not formally confirmed key super rates and thresholds for 2024/25.

Karen Maher
Associate

If you have any questions or comments, please email me at karen@gfmwealth.com.au

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