How Do I Take Advantage of Increased Super Contribution Caps?

By Prime Advisory, 23 April 2024

Superannuation contribution caps are set to increase, and there’s a golden opportunity to capitalise. Here’s what you need to know.

Good news is on the horizon…

From 1 July 2024, contribution caps will rise—marking the first increase in three years.

As of this date, the amount you can contribute to super will climb from $27,500 to $30,000 for concessional super contributions and from $110,000 to $120,000 for non-concessional contributions.

The contribution caps are indexed to wages growth based on the prior year December quarter’s average weekly ordinary times earnings (AWOTE).

Growth in wages during that quarter was high enough to trigger the first hike in contribution caps since 1 July 2021.

Indexation has also impacted other related areas. These include:

The government super co-contribution—income threshold
The super guarantee maximum contribution base (the limit for compulsory super guarantee payments)
The tax-free thresholds for redundancy payments
The CGT contribution cap (the amount that can be contributed to super following the sale of eligible business assets)

For those fortunate enough to have the disposable income to contribute, superannuation can be highly attractive with a 15% tax rate on concessional super contributions and potentially tax-free withdrawals upon retirement.

For business owners who might have had an outstanding year, or sold their venture, it’s an opportunity to get more into super.

But the timing of contributions is crucial, to maximise outcomes.

For example, if you know you’ll have a capital gains tax liability in a particular year, you may be able to lean on ‘catch up’ contributions to make a larger than usual contribution and use the tax deduction to help offset your capital gains tax bill.

But this strategy will only be effective if you meet the eligibility criteria to make catch up contributions and you lodge a notice of intent to claim or vary a deduction for personal super contributions with your super fund.

Leveraging the Bring Forward Rule

This rule allows you to bring forward up to two years’ worth of future non-concessional contributions into the year you make the contribution—although, this is assuming your total superannuation balance enables you to make the contribution and you are aged under 75.

If you utilise the bring forward rule before 30 June, the maximum that can be contributed is $330,000.

However, if you wait to trigger the bring forward contribution until or after 1 July, then the maximum that can be contributed under this rule increases to $360,000.

Elsewhere, if your super balance is below $500,000 on the prior 30 June, and you wish to rapidly increase the total you hold in super, you can utilise any unused concessional super contributions amounts from the last five years.