Maximising your super contributions and taking advantage of carry forward concessional contributions can open up new wealth-building opportunities. With the constantly evolving superannuation legislation, keeping track of the latest rules and strategies is crucial to making informed decisions.

Recent Changes to Super Contribution Rules

Several updates have impacted superannuation contribution rules in the past couple of years, including:

  • Transfer Balance Cap (TBC) increased from $1.7m to $1.9m.
  • Superannuation Guarantee (SG) increased from 11% to 11.5% (as of 1st July 2024, with further increases scheduled to reach 12% by 2025.
  • Downsizer contribution eligibility lowered to 55 years (effective from 1st January 2023).
  • Individuals under 75 may use the bring-forward rule for non-concessional contributions starting in 2022.

These changes present opportunities to increase your retirement savings through super contributions.

 

Understanding Super Contribution Types in an SMSF

There are two main types of contributions in an SMSF:

  • Concessional Contributions: These are pre-tax contributions that include the Superannuation Guarantee (SG), salary sacrifice contributions, and personal contributions where you claim a tax deduction. The concessional contributions cap is currently $30,000 annually.
  • Non-Concessional Contributions: These are after-tax contributions, meaning the income has already been taxed at your marginal rate. The annual cap for non-concessional contributions is $120,000. If you meet the eligible criteria, you may also be able to bring forward up to three years’ worth of contributions (up to $360,000) if you are under 75.

 

Maximising Concessional Contributions

You can maximise your concessional contributions by:

  • Utilising Carry Forward Contributions: If your super balance is less than $500,000 at the end of the prior financial year, you can carry forward any unused concessional contributions from the previous five years. Using the example below, if you did not use the total contribution cap during the 2023 to 2024 financial year you would be able to contribution $90,000 in the 2025 year, as there would be $30,000 cap for the 2025 year and $60,000 in unused contributions from the prior years.

  • Salary Sacrifice: Ask your employer to contribute a portion of your pre-tax salary into your super fund, in addition to the 11.5% SG contribution. This reduces your taxable income while boosting your super balance.
  • Spouse Contributions: You can split concessional contributions with your spouse to manage your super balance within thresholds like the $1.9 million TBC or the $500,000 limit for carry forward contributions.

 

Maximising Non-Concessional Contributions

  • Using the Bring-Forward Rule: If you are under 75, you can bring forward two future years’ worth of non-concessional contributions, allowing you to contribute up to $360,000 in one year.
  • Downsizer Contributions: If you are 55 or older and have sold your home (owned for at least 10 years), you can contribute up to $300,000 (or $600,000 for a couple) to your super, even if your total super balance exceeds $1.9 million.
  • Spouse Contributions: If your spouse has a lower income, you can contribute to their super and potentially claim a tax offset while managing your own contribution caps.

 

Key Contribution Caps to Keep in Mind – From 1 July 2024

  • Concessional Cap: $30,000 per year
  • Non-Concessional Cap: $120,000 per year, or up to $330,000 using the bring-forward rule.
  • Total Super Balance Cap: The new transfer balance cap of $1.9 million was applied from 1st July 2023.

 

Leveraging Recent Changes for Your SMSF

The increase in the transfer balance cap, the rise in SG contributions, and the expansion of age eligibility for downsizer and bring-forward contributions offer multiple ways to enhance your super balance. Understanding how these updates can benefit your personal situation is crucial for long-term retirement planning.

 

Key Takeaways and Next Steps

To maximise your super contributions:

  1. Check your super balance to determine eligibility for carry forward concessional contributions or non-concessional bring-forward contributions.
  2. Plan your contributions strategically, considering recent legislative changes like the SG increase and the new downsizer contribution eligibility.
  3. Speak to us to ensure you’re making the most of these rules while avoiding excess contributions that could result in tax penalties.

By understanding and applying the latest rules, you can significantly enhance your SMSF and retirement savings strategy.