Following the release of the latest Average Weekly Ordinary Time Earnings (AWOTE) index, the expected increase to the contribution caps from 1 July 2024 has been confirmed. The fact that contribution caps will increase while the general transfer balance will not creates unprecedented interesting quirks.
The current regime for concessional and non-concessional caps was introduced back in 2017 when non-concessional contribution caps were linked to the size of a member’s total super balance.
Since contribution caps are linked to wages (rather than inflation) they have increased very slowly since then (in fact, only once in 1 July 2021).
Back then, both the contribution caps and transfer balance cap increased at the same time so the adjustments to the table of non-concessional contribution thresholds for those looking to use the “bring forward” rules made perfect sense.
From 1 July 2024, we will see an increase in the concessional contributions cap from $27,500 to $30,000. Since the non-concessional contributions cap is 4 times this limit, it will increase from $110,000 to $120,000 (or $240,000 and $360,000 for those using the bring forward rules).
However, the fact that the general transfer balance cap (which is based on inflation instead) won’t increase means we have some interesting changes.
| Current thresholds and caps (2023/24) | Next year's thresholds and caps (2024/25) | ||
| TSB at 30 June 2023 | Maximum NCC Cap | TSB at 30 June 2024 | Maximum NCC Capt |
| $1.9m or more | $nil | $1.9m or more | $nil |
| $1.79m - less than $1.9m | $110,000 | $1.78m - less than $1.9m | $120,000 |
| $1.68m - less than $1.79m | $220,000 (2 years) | $1.66m - less than $1.78m | $240,000 (2 years) |
| Less than $1.68m | $330,000 (3 years) | Less than $1.66m | $360,000 (3 years) |
(Of course, it’s important to remember that people who are already in the middle of a bring forward period don’t immediately step up to the new limits – more on that later)
Something noteable about this next change is that the thresholds for the bring forward rules (the left hand column for each year) will actually go down next year – meaning those hovering around a threshold will find it slightly harder to make sure they’re eligible. For example, those wishing to initiate a three year bring forward period this year needed to have less than $1.68m in super at 30 June 2023. The equivalent threshold is lower at $1.66m at 30 June 2024.
This happens because of the way the numbers in the table are calculated. They are all based on the general transfer balance cap ($1.9m) less 1 or 2 years’ worth of non-concessional contributions.
For example, $1.66m at 30 June 2024 is $1.9m less 2 years’ caps ($240,000). The same calculation at 30 June 2023 was $1.68m ($1.9 less $220,000).
We didn’t see this back on 1 July 2021 because both the general transfer balance cap and the contributions cap went up at the same time.
What about people already in a 2 or 3 year bring forward period?
They don’t get any benefit of the increase until that is over. So someone with a total super balance of $1.7m who contributes $220,000 in 2023/24 and uses the 2 year bring forward rules is still capped at $220,000 – they don’t get to increase this to $230,000 ($110,000 for 2023/24 + $120,000 for 2024/25).
This article first appeared on Heffron
The information contained on this website and in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website and in this article are of a general nature only and are based on our interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Client Portal
View Comments