The announcement of a super contribution caps increase effective from 1 July 2024 certainly bodes well for savvy pre-retirees and older workers looking for extra resources to boost their retirement funds.
This came after the Australian Bureau of Statistics revealed that average weekly ordinary time earnings (AWOTE) increased by 4.5%, seasonally adjusted, in the period up to November 2023.
According to the Australian Bureau of Statistics, in the period between 2018-19 and 2020-21, there was a significant increase in the number of people who reported receiving a lump sum payment from a superannuation scheme. The number went up from 540,000 to 870,000.
Most of this increase was among people who had yet to retire.
The increase is attributed to the early release of superannuation funds permitted during the COVID-19 pandemic, allowing people facing financial hardship to access up to $20,000 of their superannuation before retirement.
What will happen from 1 July 2024?
The concessional contribution cap will be raised from $27,500 to $30,000, with the non-concessional contribution cap increased from $110,000 to $120,000.
The super contribution caps increase especially benefits older individuals who are more likely to make extra contributions as they prepare for retirement.
What will these super contribution caps increase mean for super in general?
The increased caps will provide savvy pre-retiree and older workers with more resources to enhance their retirement savings and leverage the advantageous tax environment within the super system.
These provisions aim to support individuals in building their retirement nest egg and provide relief for the burden on taxpayers by decreasing reliance on the age pension. Individuals who are eligible to take advantage of the increased limits in the upcoming financial year should carefully contemplate using them.
The increase in the caps will typically benefit those with more disposable income, such as empty-nesters. However, extra super contributions won’t always be the best option.
Those individuals who still have a mortgage, for instance, may be better off by making extra repayments.
Understanding contribution caps is essential to avoid extra taxes. Concessional contributions (pre-tax) and fund investment earnings are typically taxed at a rate of 15%. Exceeding the contribution caps may lead to extra tax obligations.
Individuals need to be aware of the limits on contributions and the tax implications of exceeding them. Contribution caps apply across all super accounts, including those with different funds, emphasising the importance of monitoring contributions to avoid tax penalties
Talk to our team of financial advisers about how you can navigate the super contribution caps increase
If you’re ready to maximise the benefits of these changes and secure your financial future, don’t hesitate to reach out to our team of financial advisers today. Let us help you navigate the complexities of the super contribution caps increase and plan for a retirement that you can truly enjoy.
This article contains general information about superannuation contributions. It does not consider your individual personal circumstances and therefore should not be relied upon when making decisions about your personal super contributions. Before relying on any content, you should ensure that you have obtained individual personal advice from a licenced Financial Adviser.
