Knowing the super contribution caps is an important aspect of retirement planning, as understanding the rules can help you maximise your retirement savings.
The government encourages us to contribute to our super by offering tax benefits. However, there are limits to how much you can contribute to your super each year without incurring additional taxes.
Knowing the super contribution caps is an important aspect of retirement planning, as understanding the rules can help you maximise your retirement savings.
Super contribution caps are set by the Australian government on the amount of money you can contribute to your super fund each financial year without incurring extra taxes. These caps are designed to ensure that super remains a tax-effective way to save for retirement while preventing high-income earners from abusing the system.
There are two main types of super contribution caps: concessional (before-tax) and non-concessional (after-tax) contributions. Let's examine these two categories and the caps associated with them for the 2024-25 financial year.
Concessional contributions are made with pre-tax income and include contributions made by your employer (Superannuation Guarantee contributions), salary sacrifice contributions, and personal contributions for which you claim a tax deduction.
For the financial year 2024-25, the concessional super contribution cap is $30,000. This means you can contribute up to $30,000 to your super fund from your pre-tax income without incurring additional taxes.
You may be eligible for a higher cap if your total superannuation balance was less than $500,000 on 30 June of the previous financial year and you have not used all your concessional caps for the last five financial years. If you exceed this cap, the excess contributions will be taxed at your marginal tax rate (tax rate you pay on your income).
If you are aged 67 to 74 you must meet a work test in order to claim a deduction for personal after-tax contributions. Consult with a financial adviser or the ATO (Australian Taxation Office) to understand your specific cap limits.
Non-concessional contributions are made with after-tax income. They include personal contributions that are not claimed as a tax deduction and any contributions made by your spouse on your behalf.
For the financial year 2024-25, the annual non-concessional super contribution cap is $120,000. This means you can contribute up to $120,000 of after-tax money to your super fund in a financial year. However, depending on your total superannuation balance last 30 June, you may be eligible to bring forward up to two financial years’ non-concessional super contribution caps, effectively allowing you to contribute up to $360,000 in one go.
Keep in mind that if your total superannuation balance last 30 June is $1.9 million or more, you cannot make non-concessional super contributions for the 2024-25 financial year. Always check the ATO's latest rules and consult with a financial adviser for the most up-to-date information.
Exceeding the super contribution caps can have financial consequences. If you go over your concessional super cap, the excess amount is taxed at your marginal tax rate. For non-concessional contributions, the excess amount is taxed at 47% unless the excess amount and its associated earnings are released from your super fund. Where these are released from super, associated earnings are taxable, so it is important to stay within the limits.
The government introduced these caps to prevent high-income earners from using super as a tax shelter, and it's important to respect these limits to avoid penalties and maintain the tax advantages associated with super.
While it's essential to stay within the super contribution caps, there are several strategies you can employ to maximise your super contributions within the limits:
The information in this article is current as at October 2024 and may be subject to change.
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This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. NULIS is part of the Insignia Financial group of companies comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (‘Insignia Financial Group’). This information may constitute general advice. The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. It is recommended that you consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you make any decisions about your superannuation. You can obtain the latest copy of the PDS (or other disclosure documents) and TMD by calling us on 132 652 or by searching for the applicable product at mlc.com.au. You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. Opinions constitute our judgement at the time of issue. The case study examples (if any) provided in this article have been included for illustrative purposes only and should not be relied upon for decision making. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the Insignia Financial Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication.
The Financial Coaches provide financial advice under the Australian Financial Services licence (AFSL) of Actuate Alliance Services Pty Ltd ABN 40 083 233 925 AFSL 240 959 (Actuate). Actuate and NULIS are both companies within Insignia Financial Group which comprises Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (Insignia Financial Group). No other entity within Insignia Financial Group, including NULIS or any other entity within the Insignia Financial Group that is a trustee for a regulated superannuation fund, is liable for or responsible for any work, action or advice provided by Actuate.
