Retirement Planning, Superannuation

What the Super Contribution Cap Rise Means for Australians

30 December 2021

Just in case you haven’t heard the good news: super contribution caps have increased. 

The transfer balance cap has increased from $1.6 million to $1.7 million – this is the lifetime limit on the amount of super that can be transferred into income streams for when you retire (ie. into a pension or annuity). 

The concessional and non-concessional contribution caps have also increased meaning you can now add more voluntary contributions to your fund. 

Below, we explain how the new contributions caps vary from the previous ones and what these changes mean for you and your future retirement. 

What are the Previous and Current Contribution Caps?

The previous contribution caps are compared here to those that took effect on July 1 2021.

Concessional Contributions
Previous Concessional Contribution Cap: $25,000
Current Concessional Contribution Cap: $27,500

 

Non-Concessional Contributions
Previous Non-Concessional Contribution Cap: $100,000
Current Non-Concessional Contribution Cap: $110,000

 

What Do These Super Contribution Caps Mean for Australians?

Any rise in the super contribution caps means you may be able to put more savings in your super. 

The tax advantages, along with the compounding of investment returns, can make a significant difference in your eventual super balance – and your retirement lifestyle. 

We always talk to our clients about the option to add voluntary contributions to their super as early as they possibly can. With the rise in contribution caps, you can now take even further advantage of the financial and tax benefits that your superannuation fund can provide. 

 

What are Concessional Super Contributions?

Concessional contributions are super contributions made by your employer from your pre-tax income or contributions with a tax-reduction claim. Concessional contributions include the following:

  • Super Guarantee — These are the pre-tax contributions that your employer is obligated to contribute to your super fund if you meet the eligibility. 
  • Salary sacrifice contributions — You can have your employer make additional contributions to your super fund from your pre-tax income.

Concessional contributions are typically taxed at a rate of 15%. For most people, this will be lower than the tax they would have to pay if they elected to take home their full pay.

For this reason, making pre-tax super contributions is a tax-effective strategy for most people. It also helps to boost your retirement savings.

 

What are Non-concessional Super Contributions?

These are contributions paid to your superannuation account from your after-tax earnings. Because you have previously paid income tax on these payments, they are tax-free when they are deposited into your super.

 

How Does The Superannuation Changes Affect the Bring-Forward Rule?

The ‘bring-forward’ rule may be useful for you if you have reached your non-concessional contribution cap within the financial year. 

If you meet the eligibility criteria, this rule allows you to contribute up to three times the annual cap, enabling you to boost your super balance even further in one financial year. 

With the increase in super contribution caps, you can not choose to contribute up to $330,000. 

However, individuals who have previously used the bring-forward rule, on the other hand, are unable to make additional non-concessional contributions and are confined to the $300,000 ceiling until their bring-forward period expires.

If you want more advice or retirement planning near the Gold Coast, consult Cambio Group’s financial advisors. Our team of financial advisors are more than willing to help you achieve your retirement objectives and navigate the constantly changing superannuation rules. 

 

Disclaimer: The information (including taxation) in this website does not consider your personal circumstances and is of a general nature only – unless otherwise stated. You should not act on the information provided without first obtaining professional advice specific to your circumstances.

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