Every year it feels as though the contribution caps are changing in some way or another and on top of that our employer SG contributions are going up. This makes it very important to know what caps are relevant to you and when you can utilise different types of super contributions to help build your wealth.
Types of contributions
Let’s start by going over the types of contributions as they can sound complex. Firstly there are concessional contributions. These are made up of both employer contributions and personal contributions which you have claimed a tax deduction for (including salary sacrificed contributions). Then there are non-concessional contributions. These are personal contributions made to super where you have not claimed a tax deduction and include first home saver contributions and after tax spouse contributions. The current caps for both contribution types are listed below. Note that recently these were increased:
Catchup concessional contributions:
Did you also know that any unused concessional cap since 2020 is not lost? You can actually use the unused portion in a future year. This can be a great way to boost super while giving you a great tax saving.
For example, if you only contributed $10,000 in 2020 and 2021 you can potentially contribute an extra $30,000 in 2022 ($15,000 x 2). You do need to check that you are eligible to do so (your super balance must be below $500,000) but a great place to start is your MyGov account which will show you how much you are able to contribute from any unused caps or alternatively get in touch with your trusted advisor. Read more about them here.
Bring forward non-concessional contributions:
These are different to those mentioned above where they involve bringing forward future contribution caps and using them in the current year. They must also only be non-concessional contributions. In one year you can bring forward the following two years non-concessional cap effectively allowing a three year lump sum in one year. For example, you may like to contribute your cap for 2022 as well as your 2023 and 2024 cap giving you access to make $330,000 in one year. However, you will then not be able to make non-concessional contributions for the next two years.
Again, eligibility is important. If your super balance is over $1.48m but below $1.7m you will have a reduced non-concessional cap. If your balance is over $1.7m you cannot make any non-concessional contributions. Your age is also important. If you are over 67 and no longer working you will not be able to make non-concessional contributions to super. This age is marked to increase to 74 from 1 July 2022. Read more about the above contributions and the recent changes in our Federal Budget Blog.
Other types of contributions:
Downsizer contributions – if you are over 65 (reducing to 60 from 1 July 2022) and selling your home that you have owned for more than 10 years, you and your spouse may be able to contribute up to $300,000 each to super. Downsizer contributions are not subject to the annual caps or dependant on your super balance and there are no requirements to work or be below a certain age. Read more about them here.
Small business CGT concessions – those that own and run a small business may be eligible to reduce their capital gain from the sale of an active asset used in a small business by contributing to super. There are different types and strict eligibility requirements so get in touch with your advisor to find out more. The ATO have summarised these here: CGT concessions | Australian Taxation Office.
Government Co-contributions – if you are a low or middle income earner and make a non-concessional contribution to super, the government will also make a contribution to super up to $500. Find out more on the ATO website: Super co-contribution | Australian Taxation Office.
If you would like to boost your super by accessing the benefits of making different types of contributions get in touch with us here and we can review your situation.
This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.