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Supearannuation Contributions Cap
super changes
News | Superannuation contribution caps increase
Chris Morcom
Partner/Private Client Adviser
26 Feb 2021
With the release of the Average Weekly Ordinary Time Earnings (AWOTE) index this week, we can now be certain of the caps that apply to superannuation contributions for the 2021-22 financial year.
These changes will affect many of our clients and those people transitioning to retirement. Below is a summary of all you need to know to maximise your superannuation
Concessional Contributions
The maximum Concessional Contribution limit will rise to $27,500 for the 2021-22 financial year, from the current $25,000.
Non-Concessional Contributions
| Age | Non-concessional contribution limit |
|
Under 65 years old on 1 July of the year. |
$110,000(1) per annum or $330,000 if averaging over 3 years, provided that the contributions are made prior to turning age 65. |
|
Age 65-74 years old on 1 July of the year(3) |
$110,000 per annum – but only if you satisfy the work test (2) |
(1) This cap is equal to 4 times the standard concessional contribution cap.
Individuals with a total superannuation balance above $1.7 million on 30 June 2021 will not be eligible to make non-concessional contributions.
The Bring Forward Rule
(2) People who contribute $330,000 prior to turning 65 (e.g. age 64) will not also be required to meet the work test in the two tax years after they make the contribution.
(3) Legislation is waiting to be passed by the Senate (at the time of writing) to allow those aged under 67 to use the bring-forward rule for their non-concessional contributions. Currently, only those aged under 65 years of age can use the bring-forward rule for their non-concessional contributions.
What does this mean?
For those wanting to maximise their concessional contributions, you will need to ensure you increase your contributions from 1 July this year. This could mean increasing your regular salary sacrifice contributions or even topping up your concessional contributions by making a personal tax-deductible contribution to your superannuation fund.
For those wanting to maximise their superannuation balances by making non-concessional contributions, careful planning is required. If you want to use the bring-forward rule, then make sure you trigger it in the correct financial year.
The indexation of limits also impacts the amount you can use to start a retirement phase pension – up from $1.6 million to $1.7 million. Again, there are some complexities for those who already have (or have had) retirement phase pensions in place.
If you are interested in exploring how the new limits impact your own financial planning arrangements, please make a time to speak with one of our highly qualified Private Client Advisers, you can contact us HERE
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.