Author: Emma Partenza, Manager, TAG Financial Services
Following on from the recent announcement of the Transfer Balance Cap increasing on 1 July 2021, superannuation contribution caps are also on the rise for the first time since the introduction of Simple Super on 1 July 2017. This has been triggered by sufficient increases in CPI and Average Weekly Ordinary Times Earnings (AWOTE).
While increases are welcome, this provides additional complexity and requires stringent monitoring to ensure caps are not breached.
New Contribution Caps
The contribution cap changes are:
| 1 July 2017 to 30 June 2021 | From 1 July 2021 | |
| Concessional Contribution | $25,000 per annum | $27,500 per annum |
| Non-Concessional Contribution | $100,000 per annum | $110,000 per annum |
The ability for a member to contribute is dependent on their age and Total Superannuation Balance (TSB) at the previous 30 June. Total Superannuation Balance will be measured at $1,700,000 from 1 July 2021.
Bring Forward Rule
The bring-forward rule for non-concessional contributions will apply from 1 July 2021 as follows:
| Allowable bring forward NCC | Allowable bring forward NCC |
| $1,700,000 or more | Not eligible |
| $1,590,000 to less than $1,700,000 | $110,000 |
| $1,480,000 to less than $1,590,000 | $220,000 |
| Less than $1,480,000 | $330,000 |
It is important to note that increasing the bring-forward rule to age 67 to align with the work test increase on 1 July 2020 is still to be legislated (proposed in 2019 Federal Budget). Therefore, only members aged under 65 may currently utilise the bring forward rule.
Members who have triggered the bring-forward rule before 1 July 2021 will not benefit from the increases in the contribution caps until their current bring forward period expires. As the bring-forward amount is based on the standard non-concessional contribution cap in the year in which it was triggered.
Contribution Strategies
With the caps increasing, considering the following contribution strategies become even more important:
- Maximising concessional contributions (including catch up concessional)
- Re-contribution strategies
- Contribution strategies before retirement.
- Additional opportunities may also present themselves for members who may have previously been unable to contribute with the TSB threshold at $1,600,000.
Watch our for Breaches!
It is crucial proper planning is undertaken to ensure contribution caps are not breached as excess penalties will apply. As always, there are nuances in how the contribution caps apply for all members that need to be taken into serious consideration.
If you have any questions, please contact us on 03 9886 0800 or via email.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686).