Starting from 1 July 2024, there will be an increase in the maximum contribution to superannuation. Here’s how you can make the most of this change.

 

Contribution Limits: 

The contribution limits for superannuation will rise from $27,500 to $30,000 for concessional contributions and from $110,000 to $120,000 for non-concessional contributions starting from 1 July 2024. 

These caps are adjusted based on the growth of wages, with this increase being the first in three years due to significant wage growth.

 

Other Impacts:

Indexation will also affect other areas such as the income threshold for the Government super co-contribution, the super guarantee maximum contribution base, tax-free thresholds for redundancy payments, and the CGT contribution cap.

 

Opportunities:

For those with disposable income, contributing to superannuation can be highly beneficial due to the concessional tax rate of 15% on contributions and potentially tax-free withdrawals upon retirement. 

Business owners who have experienced a profitable year or sold their business can capitalize on this opportunity to maximize their super contributions. However, timing these contributions strategically will be crucial for optimal outcomes.

Utilizing Strategies:

If you anticipate a capital gains tax liability, you can leverage ‘catch up’ contributions to make larger contributions than usual and offset your tax bill. However, eligibility criteria must be met, and a Notice of Intent to claim or vary a deduction for personal super contributions must be lodged with your super fund.

 

Bring Forward Rule:

The bring forward rule allows you to bring forward up to two years’ worth of future non-concessional contributions into the current year, provided your total superannuation balance allows it and you are under 75 years old. 

Triggering this rule before 30 June enables a maximum contribution of $330,000, which increases to $360,000 if triggered on or after 1 July.

 

Catch Up Contributions:

Individuals with a super balance below $500,000 as of the prior 30 June can utilize any unused concessional contributions from the last five years to quickly boost their super balance. For instance, if Gary has been using only $15,000 of his concessional cap for the past few years and his balance was $300,000 on 30 June 2023, he can access the unused amounts from the prior five financial years.

 

	Concessional Cap	Used	Unused
2018-19	$25,000	$15,000	$10,000
2019-20	$25,000	$15,000	$10,000
2020-21	$25,000	$15,000	$10,000
2021-22	$27,500	$15,000	$12,500
2022-23	$27,500	$15,000	$12,500
2023-24	$27,500	?	?

Transfer Balance Cap:

The transfer balance cap, which limits the amount transferable into a tax-free retirement account, will remain unchanged at $1.9 million for 2024-25.

 

Revised Tax Cuts:

The revised stage 3 tax cuts, set to commence on 1 July 2024, have been confirmed by Parliament. Prior to their implementation, it’s essential to review any salary sacrifice agreements to ensure they align with your desired outcomes.

 

Resident individuals

Tax rate	2023-24	2024-25
0%	$0 – $18,200	$0 – $18,200
16%		$18,201 – $45,000
19%	$18,201 – $45,000
30%		$45,001 – $135,000
32.5%	$45,001 – $120,000
37%	$120,001 – $180,000	$135,001 – $190,000
45%	>$180,000	>$190,000

Non-resident individuals

Tax rate	2023-24	2024-25
30%		$0 – $135,000
32.5%	$0 – $120,000
37%	$120,001 – $180,000	$135,001 – $190,000
45%	>$180,000	>$190,000

Working holiday markers

Tax rate	2023-24	2024-25
15%	0 – $45,000	0 – $45,000
30%		$45,001 – $135,000
32.5%	$45,001 – $120,000
37%	$120,001 – $180,000	$135,001 – $190,000
45%	>$180,000	>$190,000

If you have any questions, please contact Bates Cosgrave.