Superannuation being the backbone of retirement savings in Australia, is subject to various caps and limits. As of 1 July 2024, several new superannuation caps will come into effect, presenting both challenges and strategic opportunities for individuals planning their retirement savings. In this article, we will outline the new caps, discuss the strategic opportunities they present, and clarify that there will be no change in the total superannuation balance cap and transfer balance cap.
New Superannuation Caps from 1 July 2024:
- Concessional Contributions Cap: The concessional contributions cap will be increased to $30,000 per year.
- Non-Concessional Contributions Cap: The non-concessional contributions cap will be increased to $120,000 per year. Individuals who meet certain eligibility criteria may still be able to make up to three years' worth of non-concessional contributions in a single year, utilizing the bring-forward provisions which will increase the bring forward contribution cap to $360,000.
- Downsizer Contribution Cap : Unfortunately there has been no mention of this cap increasing so will remain at $300,000 for those members who meet the eligibility criteria.
Strategic Opportunities:
- Maximizing Concessional Contributions: With the increase in the concessional contributions cap, individuals can strategically maximize their contributions to take advantage of the tax benefits. It is essential to review salary sacrifice arrangements and ensure contributions stay within the new cap limits.
- Catch up Contributions: The increase in the concessional contribution cap will also see an increase in the catch up contribution cap available to members with a superannuation balance below $500,000. Again a review of utilising this cap should be done to determine whether it should be taken advantage of this year or delayed until next year.
- Utilizing Bring-Forward Provision: For clients who are looking to maximise their superannuation balance and trigger their bring forward contribution this year may wish to only make the single year contribution of $110,000 and then look to take advantage of the increase in the caps on 1 July 2024 if they have sufficient room in their Total Super Balance Cap. It should be noted that individuals who have previously triggered bring-forward period will not benefit from the increase in the Non-concessional contribution cap. Their contribution levels for 2024-25 will be limited to the amount that they had previously locked in
- Co-contributions and Spouse Contributions: Individuals who qualify for the government's co-contribution scheme or wish to make spouse contributions can benefit from these strategies to boost their superannuation balances. These options can potentially attract additional contributions from the government or lead to tax advantages.
- Reviewing Investment Strategies: With the new caps in place, it is crucial for individuals to review their investment strategies within their superannuation funds. This includes considering the appropriate asset allocation, diversification, and risk management to optimize returns and achieve long-term financial goals.
It is important to note that while the new superannuation caps will be introduced, there will be no changes to the total superannuation balance cap and transfer balance cap and these will both remain at $1.9 million.
The new superannuation caps effective from 1 July 2024 present strategic opportunities for individuals to optimize their retirement savings. By leveraging the increased concessional and non-concessional contributions caps, utilizing the bring-forward provision, and exploring co-contributions and spouse contributions, individuals can take advantage of the tax benefits and boost their superannuation balances. However, it is essential to remember that the total superannuation balance and transfer balance cap remain unchanged, requiring careful planning and monitoring of retirement savings.
