The Australian government has recently announced some significant changes to superannuation contributions affecting Australians saving for their retirement.
From July 1, 2021, the concessional contributions cap increased from the current limit of $25,000 per annum to $27,500 per annum.
This cap includes your employer’s compulsory Superannuation Guarantee Contributions, and voluntary contributions, including salary sacrifice and personal contributions for which you claim a deduction.
Those that take advantage of the increase in concessional contribution limits may benefit from a larger tax-deduction and therefore additional tax savings.
Where your total superannuation balance is less than $500,000 as of 30th of June, and you are eligible to make superannuation contributions within the following financial year, you can utilise carry-forward unused concessional contributions.
Carry-forward concessional contribution rules allow you to access unused concessional contribution cap amounts from the 2018-2019 financial year onwards to make extra concessional contributions. Unused concessional contributions can be carried forward for 5 years.
An unused cap amount occurs when the concessional contributions you made in a financial year were less than your general concessional contributions cap. This means you can make concessional contributions above the general concessional contributions cap for the year.
From July 1, 2021, the non-concessional contributions cap increased from $100,000 per annum to $110,000 per annum.
The transfer balance cap also increased from $1.6 to $1.7 million. This is the limit on the amount you can transfer into the tax-free retirement phase within superannuation.
Your total superannuation balance determines your eligibility to make non-concessional contributions.
This means that if your total superannuation balance at the end of the 2020-21 financial year was less than $1.7 million, you may be able to make non-concessional contributions of at least $110,000 in the 2021-22 financial year.
In certain circumstances, you may be eligible to make non-concessional contributions in excess of your annual cap. This is known as the bring-forward arrangement, which allows you to utilise the current and some or all of the subsequent two financial years’ non-concessional contribution limits.
Under the revised rules, those aged 66 and under as of the 1st of July of the financial year, can access the bring-forward rule, provided the contribution is made prior to their 67th birthday.
This means individuals aged 65 and 66 who were not previously able to access the bring forward non-concessional contributions cap may now do so.
If you’re interested in discussing how these changes may benefit you, please contact the financial planning experts at HG Financial Services. Make an appointment today to see a superannuation advisor via Contact Us, or phone 03 5221 2355.