You may recall in mid-April we shared a preview of 1 July changes to superannuation.
Since then we have had many members asking questions about the various ways they might use the new contribution amounts to boost their retirement income. It seems that many of these different rules sound either incomprehensible, or you need a white board to start to understand how they relate to each other. Today we look at each of the changes and explain how you can take advantage of these new rules.
Salary sacrifice
Concessional (or pre-tax) contributions have increased from $27,500 to $30,000 per annum. The concessional amount includes your super guarantee which is the compulsory payment by your employer (of 11.5%) into the fund of your choice. You can now top up this amount to a total of $30,000 and the tax payable on this concessional contribution will be 15%. If the total concessional contributions (11.5% super guarantee and any salary sacrifice contributions) exceed the concessional cap the extra contribution above the $30,000 taxed at their marginal rate.
Carry forward provision
The increase to the concessional contribution has a flow-on effect on the carry forward provision. This provision allows people who may have struggled to contribute extra to super early in life to catch up later on, perhaps when the kids are off their hands or they have paid off the mortgage. It allows you to take advantage of the 15% concessional tax rate on super contributions and use this for up to five years of unused contributions. If your balance is below $500,000 you can carry forward up to five years of concessional contributions caps. So in theory someone who has not had any contributions to super for the previous five years (from 2019/20 to 2023/24) could contribute $132,500 by carrying forward 5 years of unused concessional caps. with the current year’s $30,000 cap. This would amount to a $112,125 contribution to super once the 15% tax has been applied. The table below shows how that would work. These contributions can be made up to age 67 or even up to age 75 if the work test is met.
| Year | Concessional Cap for that year |
| 2019/20 | $25,000 |
| 2020/21 | $25,000 |
| 2021/22 | $27,500 |
| 2022/23 | $27,500 |
| 2023/24 | $27,500 |
| Total before tax | $132,500 |
| Total contribution after 15% tax | $112,625 |
Non-concessional caps
The new amount for the non-concessional cap is four times the new concessional cap, i.e. $30,000 x 4 = $120,000 per annum. If your total super balance is less than $1.66 million, you can bring forward up to three times the new cap, meaning that up to $360,000 can be transferred to your super in one year. This is a very useful strategy for those who might have had a windfall such as an inheritance or have downsized or sold other assets.
Downsizer contributions
Such contributions are able to be made by homeowners who meet the age and residency criteria and sell a home they have owned for more than 10 years. The contribution is up to $300,000 per person, so it could be $600,000 per couple. The downsizer contribution is one contribution type where neither of the age limits nor work test apply. And you can still make downsizer contributions even if you have exceeded your personal transfer balance cap. The excess amount will have to remain in an accumulation account however.
We understand that the change in the concessional contribution cap, which then affects the carry-forward rule as well as the bring-forward rule may seem complicated. The most important thing is that you understand and use the rules which apply specifically to your situation, be it pre-retirement and working, transitioning to retirement, or retired without regular work income. At each stage there are rules which will allow you to boost your income. If you remain unsure about which rules are most useful in your own situation, it’s likely that an Understanding more about super consultation will assist you to assess the options to make your super work better for you.
Have you found the new limits helpful?
Or are you yet to use them to top-up your super?
This article is provided by Retirement Essentials Representative Number: 001260855. We are an authorised representative of SuperEd Pty Ltd ABN 88 118 480 907 AFSL #468859. This information is not intended as financial product advice, legal advice or taxation advice. It does not take into account your personal situation, goals or needs and you should assess your own financial situation, consider if the information is suitable for you and ensure you read the relevant Product Disclosure Statement (PDS) if you choose to make any changes to your financial situation. It is always advisable to consult a financial adviser before making financial decisions.
can I add to my supper if I’m 72 and have not worked for many years. I received the money when my mother passed away.
Hi Kathryn, the rules surrounding personal contributions can be tricky, it’d be best to book a consultation with one of our specialists who can clarify each of your options and their individual pros/cons so that you can make the best decision for you. CLICK HERE to make a booking.
Asking the same question
Is it possible to add to super if not working anymore
Hi Ann. Yes it is. As long as you are under age 75 you can make personal contributions to super up until your total super balance is $1.9m. You can also use the downsizer provisions to contribute after age 75.. And the total super balance limit of $1.9m doesn’t apply to the downsizer contribution.
5 years ago my wife deposited $100000 into her super. Does that mean she could now deposit up to $260000 into super based on current bring forward amount of $360000?
Hi Peter, it may well be possible but there are a lot of rules around this so I cannot confirm with certainty. It would be best to book a consultation with one of our specialists who can explain how it works and your options HERE.
if you pay for car insurance annually and thus lower your savinggs account balance , does that impact on your partial pension?
similarly, we have been quoted $20k to fix and reseal our driveway. will paying that from our savings account have an impact on our partial age pension?
Hi Margaret, great question! Yes it is likely that reducing your asset balance with these expenses will mean you get an increased pension. It depends on whether Centrelink are calculating your pension based on your assets or income though. If you have a higher income, then lowering your assets won’t necessarily mean an increase in pension.
Is “downsizer profit” included immediately in OAP asset calculations.
Hi Michael, there is a 24 month exemption from asset testing placed on the proceeds from the sale of your previous home to allow time for the purchase/build of the new home however, once the new home has settled the exemption ends and any remaining funds will become assessable.
We bought a block of land in 2011, then sold our house and rented from 2014 whilst we built a house on the land. Does the ten years for ownership in downsizing benefit start from when we bought the land (2011); from when we sold our house (2014), or from when the new house was completed and we moved in (2017).
Hi David, great question! Based on the rules and wording relating to ‘home’ as stated on the ATO website we believe this 10 years would apply from the time the house was completed.
Hi
Can I use to top up super If I sell investment property and use the profit?
Hi Bhavani. Yes you can if you are under the relevant contribution thresholds. e.g. the non concessional contribution cap is $120,000 per year and you can bring forward up to 3 years of contributions totalling $360,000 if your total superannuation balance is below $1.66m. As per your question yes the money to make this contribution could come from the sale of an investment property. You should of course get tax advice as there may be capital gains payable on the property sale.
Your notes on the changes to the salary sacrifice rules state in part: “Those on high salaries for whom 11.5% super guarantee (SG) means they exceed the concessional cap will have the extra contribution above the $30,000 taxed at their marginal rate.”
Is this correct?
REST Super states that SG contributions for high income earners are limited by the maximum super contribution base (MSCB), which sets a limit on the quarterly earnings that qualify for Superannuation Guarantee (SG) contributions.
If you earn more than this limit in a quarter (currently $65,070), your employer doesn’t have to pay you SG contributions for any amounts earned above the limit.
Assume you have ordinary-time earnings of $300,000 gross pa, and excluding bonuses.
$11.5% SG x $300k = $34,500. This is well above the current annual concessional cap of $30,000.
However, under the MSCB rules, the employer does not have to pay more than $30,000.
An employer can choose to make super contributions even if your income exceeds the MSCB. In this scenario, exceeding contributions caps means you’ll need to pay extra tax.
Hi James. You are correct on the SG comment and that many employers don’t pay SG beyond the $30,000 concessional limit. This point however related to salary sacrifice contributions. Once the $30,000 threshold has been exceeded any further SG or salary sacrifice contributions would be taxed at the marginal tax rate.
“As long as you are under age 75 you can make personal contributions to super up until your total super balance is $1.9m.”
This $1.9m figure is a mystery to me. It seems as though it is a limit for super balances, BUT then you hear of some people having millions in their super. How do these large super balances get past the $1.9m limit?
Hi
If my super balance ow is $1.5 million (<1.66M). If we sell our property what would be maximum amount we would be allowed to put in to super. Is it still 300K.
Regards
Sam
$30k concessional this FY, $300k down sizer Contribution and up to $360k non concessional if you haven’t access your bring forward arrangements