Superannuation Contribution Refresher

With the holiday season offering some downtime, it was an ideal opportunity to assess your finances and consider ways to boost your superannuation. After reducing your mortgage, superannuation is the most tax-effective structure for your money. As we begin our run towards June 30 and start to plan ahead for our clients at Hewison Private Wealth, I thought it would be a good time to review recent changes via the stage three tax cuts and updates to super contribution caps. While people are struggling with cost-of-living pressures, the tax relief may mean you’ll have more disposable income and possibly even a surplus to invest.

Concessional contributions, made before tax, allow for tax benefits while boosting retirement savings. While the greatest advantages are for those earning between $190,000 to $250,000, low-income earners (earning up to $37,000) can still receive a super tax offset of up to $500, which effectively refunds the 15% tax on super contributions. For 2024-2025, the concessional contributions cap increased to $30,000. With the Superannuation Guarantee (SG) rate rising to 11.5% from 1 July 24 and set to climb again to 12% on 1 July 2025, it’s important to consider voluntary contributions, especially as employer contributions will absorb part of this increase.

Individuals aged 67-74 must meet a “work test” (40 hours in 30 days) to claim a tax deduction on personal contributions, though there is a work test exemption available for those with a super balance under $300,000 and who met the work test in the previous year. For larger contributions, unused concessional cap amounts from the last five years can be carried forward, which may lead to larger tax deductions and savings. This is especially helpful if you’ve sold an investment property and want to reduce capital gains tax. If eligible, some may claim tax deductions as large as $162,500.

Non-concessional (after-tax) contributions have a cap of $120,000, and those under 75 can contribute if their super balance is under $1.9 million. The “bring-forward rule” may allow contributions of up to $360,000 if the balance is under $1.66 million, with slightly reduced limits for higher balances. Be mindful of excess concessional contributions as these may unintentionally trigger the bring-forward rule.

If you are over 55 and selling a long-held home, you may qualify to make a downsizer contribution of up to $300,000 per individual, or $600,000 for a couple, regardless of age or super balance, which can help increase super savings even if you’re typically ineligible.

For small business owners, the Capital Gains Tax (CGT) cap allows contributions of up to $1.78 million when selling a business.

Finally, if starting a super pension, the general transfer balance cap is $1.9 million, potentially rising to $2 million in July 2025, enabling more tax-free retirement savings. You may also consider withdrawing lump sums to manage your transfer balance cap.

By planning ahead, you can take full advantage of these opportunities before tax time. Please reach out to any of the advisers at Hewison Private Wealth should you wish to discuss any of the above strategies in the broader context of your current situation.