The amount of money you can contribute into your super each year is about to increase.
The caps on concessional and non-concessional super contributions will increase from 1 July this year, meaning you may be able to put more money into super.
Below we explain how the new caps differ to the old ones and what these changes could mean for you.
What are the new concessional and non-concessional contribution caps?
If you’re making contributions to your super, there are limits on the amount of concessional and non-concessional contributions you can make each year.
Below you can compare the current contribution caps with the contribution caps that will apply from 1 July 2021.
|Contribution type||Your age||Current cap||Cap from 1 July 2021|
$25,000 a year
Plus, unused cap amounts accrued since 1 July 2018 if you're eligible*
$27,500 a year
Plus, unused cap amounts accrued since 1 July 2018 if you’re eligible*
Age determined as at 1 July of the financial year the contribution is made
|$100,000 a year
Alternatively up to three years of annual caps ($300,000) under bring-forward rules if your eligible**
|$110,000 a year
Alternatively up to three years of annual caps ($330,000) under bring-forward rules if your eligible**
|Non-concessional||65 or over
Age determined as at 1 July of the financial year the contribution is made
|$100,000 a year**||$110,000 a year**|
* This broadly applies to people whose total super balance was less than $500,000 on 30 June of the previous financial year.
** How much you can make as a non-concessional contribution depends on your total super balance as at 30 June of the previous financial year. More on this below.
What's the difference between concessional and non-concessional contributions?
Concessional contributions include:
- Compulsory contributions – these are the before-tax contributions your employer is required to make into your super fund under the Superannuation Guarantee scheme, if you’re eligible.
- Salary sacrifice contributions – these are additional contributions you can get your employer to make into your super fund out of your before-tax income if you choose to.
- Tax-deductible contributions – these are voluntary contributions you can make using after-tax dollars (such as when you transfer funds from your bank account into your super), which you then claim a tax deduction for. These can be made by both self-employed people and employees.
Concessional contributions are usually taxed at 15% (or 30% if your total income exceeds $250,000). This will typically result in an overall tax saving when compared to the tax rates most people pay on their personal income.
Non-concessional contributions include:
- Personal after-tax contributions – these are contributions you put into your super fund using after-tax dollars, which you don’t claim a tax deduction for. Some reasons why you might choose to make non-concessional contributions, include if you’ve reached your concessional contributions cap, if you’ve received an inheritance, or if you’re after a government co-contribution into your super fund.
Why are concessional and non-concessional contribution caps changing?
The reason super contribution caps will increase from 1 July 2021 is because changes to these caps are dependent on Average Weekly Ordinary Time Earnings, as surveyed by the Australian Bureau of Statistics.
This is a measurement of people’s average earnings across Australia, which recently went up.
Will there be any changes to the total super balance cap?
Currently, if you have a total super balance of $1.6 million or more, as at 30 June of the previous financial year, you can’t make additional non-concessional contributions to your super, or you may be penalised. While non-concessional contributions can’t be made once you reach this limit, concessional contributions can be.
Meanwhile, from 1 July 2021, this cap will increase from $1.6 million to $1.7 million.
How does the total super balance cap affect bring-forward rules?
Your total super balance may also impact your ability to contribute up to three years of non-concessional contributions under the bring-forward rules.
Currently, your total super balance must be below $1.4 million, as at 30 June of the previous financial year, for you to be able to contribute up to three years of annual caps ($300,000) under the bring-forward rules.
From 1 July 2021, that figure will change, and your total super balance will need to be below $1.48 million, as at 30 June of the previous financial year, to contribute up to three years of annual caps ($330,000) under bring forward rules.
As your total super balance rises above this level, your ability to bring forward future year caps may be reduced, or no longer available at all, meaning only the standard cap may be available.
What other things should I know about super contributions?
- If you exceed super contribution caps, additional tax and penalties may apply.
- If you’re 67 or over when a super contribution is made, you’ll need to have met the work test or be eligible to use the recent retiree work test exemption.
- If you’re 65 or over, you can make an after-tax downsizer contribution to your super of up to $300,000, using the proceeds from the sale of your home (if it’s your main residence), regardless of your work status, super balance, or contributions history.
- The government sets general rules around when you can access your super, which typically won’t be until you reach your preservation age and meet a condition of release, such as retirement.
Are there any other changes that I should be aware of?
Transfer balance cap
The amount of super savings that can be transferred into a retirement pension (whether you have one or more than one pension) will increase from $1.6 million to $1.7 million on 1 July this year, but not for everyone.
What that will come down to is whether you move, or have already moved, money from your super account into a retirement pension before 1 July 2021. How much you’ve moved will also have an impact. See our article on transfer balance cap changes for more details.
Eligibility criteria for claiming the tax offset on spouse contributions will increase from $1.6 million to $1.7 million on 1 July 2021.
The limit that determines if you’re entitled to a government super co-contribution will increase from $1.6 million to $1.7 million on 1 July 2021.
Where can I go for assistance?
Superannuation rules can be quite complex, so for more information regarding what caps and limits apply to you, check out your myGov account, or speak to your adviser about what might be right for you.
If you don’t have an adviser, but would like to speak to one, our directory could help you find one nearby.
In the meantime, remember the value of your investment in super can go up and down. Before making extra contributions, make sure you understand and are comfortable with any potential risk you might be taking on.
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