Super contribution caps set to increase from 1 July 2021

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By Matt Buttsworth
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Date posted:
12 April 2021, 10:30 AM

There will be an opportunity to put more money into Super from the 1st of July 2021. 

Concessional contributions

Concessional contributions are amounts paid into superannuation before tax.  The most common of these contributions are the compulsory employer super guarantee (SG) of 9.5%; salary sacrifice payments and personal contributions you are allowed to claim as an income tax deduction.

Since 1 July 2017 the concessional contribution cap for each year was $25,000. A change that will take effect from 1 July 2021 is that this concessional cap will increase from $25,000 to $27,500 per annum.

This is because the amount has been indexed, calculated on increases in the Average Weekly Ordinary Time Earnings index since 1 July 2017.

Example: Concessional contributions

A super fund member is under the age of 67 and each year makes a concessional contribution of $25,000 to her super fund so she can claim a tax deduction. From 1 July 2021, the member will be able to increase the amount she contributes to $27,500 and can claim a tax deduction if she wishes.

Non-Concessional contributions

Since 1 July 2017 the non-concessional contribution cap has been $100,000 per annum. Those under age 65 have been able to use ‘Bring-forward arrangements’ where they can utilise up to 3 times the annual amount ($300,000) in a single year with no further non-concessional contributions during this 3-year period. 

As with the increase to concessional contribution caps, the non-concessional cap will increase from 1 July 2021 to $110,000 per annum, which in turn will see the bring-forward arrangement to increase to $330,000 over a 3-year period.

It is important to note that the additional amount under the new bring-forward arrangement does not apply for those that have already triggered the bring-forward amount as they will have to wait until the 3 year period expires before having access to the new cap.   

Example: Bring-forward non-concessional contributions

Theo (64) receives an inheritance of $330,000 and would like to place funds into his superannuation. Theo has not made after tax contributions in the past 3 years and so from 1 July 2021 is eligible to contribute up to $330,000 into his super as a personal contribution.

In the event Theo had contributed an amount in excess of $100,000 in the prior 3 years he would have already triggered the ‘Bring-forward rule’ and so would be restricted to the previous cap of $300,000. 

Find out more

Matthew’s career in finance and advice spans two decades with the majority specialising in creating wealth and Retirement Planning. Matt utilises the technical skills and practical experience developed over many years to focus on achieving the best outcomes for his clients.

Financial Planner Matthew Buttsworth

If you would like to contemplate whether the increase in contribution limits would be advantageous to your personal situation, contact Morgans Port Macquarie office on [email protected] or via (02) 6583 1735.

General Advice warning: This article is made without consideration of any specific client’s investment objectives, financial situation or needs. It is recommended that any persons who wish to act upon this report consult with their investment adviser before doing so. Morgans does not accept any liability for the results of any actions taken or not taken on the basis of information in this report, or for any negligent misstatements, errors, or omissions.

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