The Federal government has announced there will be an increase in the standard concessional and non-concessional contribution caps.
The changes to concessional caps were expected alongside stage three tax cuts applying from 1 July 2024. This will mean that some members self-managed superannuation funds (SMSF) may have additional disposable income to contribute more to super.
From 1 July 2024, the standard concessional contribution cap will increase from $27,500 to $30,000 and the non-concessional contribution cap, which is calculated at four times the standard concessional contribution cap, will also increase from $110,000 to $120,000. This means that the maximum available, under the non-concessional contribution bring-forward provisions, will increase from $330,000 to $360,000.
Additionally, from 1 July 2024, the Total Superannuation Balance (TSB) thresholds used to determine the maximum amount of bring-forward non-concessional contributions available to an individual will also be adjusted.
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 Cap |
$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) |
However, the fact that contributions caps will increase but the general transfer balance will not, means there are some interesting anomalies that we haven’t seen before in this area.
Some background
The current legislation for concessional and non-concessional caps was introduced in 2017 and non-concessional contribution caps were linked to the size of a member’s total super balance. Contribution caps are linked to wages, not inflation, so they have increased slowly since then (once only – 1 July 2021). The general transfer balance cap is based on inflation, not wages, and therefore won’t change.
The anomaly explained
One thing of note 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 ensure they’re eligible.
For example, someone wishing to initiate a three year bring forward period this financial year would need to have less than $1.68m in super at 30 June 2023. The equivalent threshold at 30 June 2024 is now lower at $1.66m – a $20,000 difference.
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 ($1.9m less $220,000).
What happens if you are in the middle of a bring forward period?
If you are already in year two or three of a ‘bring forward period’, you won’t get any benefit of the increase until that period is over. This means that 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 do not get to increase this to $230,000 ($110,000 for 2023/24 + $120,000 for 2024/25).
If you have any questions regarding concessional and non-concessional caps or how this change in legislation may impact you, please do not hesitate to contact your SMSF specialist advisor.
