Chartered accountant GAIL FREEMAN reports on some good news from a self-managed superannuation fund conference.

The announcement of the new average weekly ordinary time earnings figure from the Bureau of Statistics caused a ripple of excitement during a self-managed superannuation fund conference I was at recently.

To an auditorium full of superannuation specialists, the importance of this announcement is that the concessional contributions cap, that is the cap that allows you to claim superannuation as a tax deduction, has increased to $30,000 from $27,500 effective from July 1. 

In ‘Super Land’ this is really exciting and gives rise to new planning strategies and opportunities.

At the same time, the non-concessional cap will increase to $120,000 from $110,000 also effective from July 1. The non-concessional cap is the maximum cap that allows you to make contributions for which you do not get a tax deduction and is additional to the concessional cap. 

Just as a memory jogger, you can bring forward up to three years’ non-concessional contributions. This means that you can make a superannuation contribution of up to $360,000 in a three-year period provided you haven’t exceeded a total superannuation balance greater than $1.66 million. 

Good news for superannuation contributors who are seeking to maximise their superannuation balance and who currently have surplus cash.

These changes can be important if you are able to make catch-up concessional contributions. Just a reminder that catch up concessional contributions have now been in play for five years, which means the amount you could claim from 2020 will drop off at June 30 this year and cannot be used. 

The new five-year period starts with the year ending June 30 2021. To take advantage of this concession you need to have a total super balance of less than $500,000 so if you’re getting close to $500,000 and you have some spare cash now might be a good time to make a catch-up contribution to at least use up the amount available from the 2020 financial year.

This is also a friendly reminder to employers that the superannuation guarantee rate will increase from 11 per cent to 11.5 per cent from July 1 and then from 11.5 per cent to 12 per cent from July 1 2025. That is the last legislated increase. 

If you’re a high-income earner, the maximum contribution base will also increase to $62,980 a quarter. So if you earn more than that, your employer does not have to contribute superannuation on the excess.

During the conference we also talked a lot about the new tax if your superannuation balance exceeds $3 million. 

The consensus is that it is not necessary to do anything to change your superannuation situation until May or June 2026. Rushing to take money out of superannuation now could be detrimental to you. 

There was some very interesting modelling that showed not everybody is going to be better off by taking money out of superannuation to reduce their balance below the $3 million threshold. 

It is difficult to make decisions now because other pieces of legislation can impact the position. Accordingly, don’t do anything now and it can be discussed when there is clarity on tax rates on indexation and other matters.

Lastly, the general transfer balance cap will remain at $1.9 million because it is indexed to CPI. It will probably increase after July 1 2025, but until we have CPI figures it is unclear, so assume for the time being that the maximum transfer balance cap is $1.9 million.

I hope this is not too confusing, however if you need guidance and expert help call us at Gail Freeman & Co on 6295 2844 or email info@gailfreeman.com.au. We can help guide you through the maze.

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.