Another year, another increase in Average Weekly Ordinary Times Earnings (AWOTE). While AWOTE adjustments rarely make headlines, this year’s change could create valuable opportunities to boost your superannuation savings.
From 1 July 2026, several super contribution caps are expected to increase, giving individuals greater flexibility to contribute more to super in a tax-effective environment. In addition, the amount retirees, or those approaching retirement, can potentially hold in a tax-free income stream (also known as an account-based pension) is also expected to rise.
It is important to note these changes have not yet been officially legislated. The projected increases are based on the indexation formula tied to AWOTE, while the amount that can be held in the tax-free super environment, called the Transfer Balance Cap (TBC), is indexed in line with CPI. Although widely expected, the final figures remain subject to confirmation.
What’s expected to change?
Concessional (before-tax) contributions
Concessional contributions are contributions made to your superannuation fund pre-tax and include employer Superannuation Guarantee contributions, salary sacrifice (voluntary pre-tax contributions) or personal contributions claimed as a tax deduction.
From 1 July 2026, the concessional contribution cap is expected to increase:
| Annual cap | 1 July 2025 to 30 June 2026 | From 1 July 2026 |
| Concessional contributions | $30,000 | $32,500 |
The key benefit of concessional contributions is the tax differential. Contributions are generally taxed at 15% within super, compared with marginal tax rates of up to 47% (including the Medicare levy) outside super.
However, when making additional contributions, it’s important to factor in your employer contributions to avoid exceeding the annual cap.
Non-concessional (after-tax) contributions
Non-concessional contributions are made using after-tax money, such as cash from your bank account. While these contributions do not provide an immediate tax deduction, they help you to build wealth in a reduced tax environment within super where investment earnings are generally taxed at a maximum of 15%, compared to up to 47% personally (including Medicare levy).
The caps are expected to increase as follows:
| Annual cap | 1 July 2025 to 30 June 2026 | From 1 July 2026 |
| Non-concessional contributions | $120,000 | $130,000 |
| Non-concessional bring-forward (3 financial years) | $360,000 | $390,000 |
If eligible, individuals can bring forward two additional years of contributions, allowing a larger amount to be contributed in a single year.
This strategy can be beneficial when receiving a large lump sum such as an inheritance, selling a significant asset (e.g. a property) or if you have accumulated savings.
However, eligibility depends on factors such as your Total Super Balance and previous contributions, so careful planning is important to avoid excess contribution tax.
Transfer Balance Cap (tax-free retirement phase)
The TBC limits the total amount of super that can be transferred into a tax-free income stream.
The cap is currently set at $2 million. From 1 July 2026, it is expected to increase to $2.1 million.
For individuals yet to commence a retirement income stream, this would allow an additional $100,000 to grow in a tax-free environment.
For example, if you had $2.1 million in a tax-free environment growing at 6% per year, the tax saving compared with a 15% taxed environment could be$18,900 annually
What is not changing?
Several key rules will remain the same:
- If you are between the ages of 67 to 74 and retired, you must still meet the work test (working 40 hours within 30 days) to claim a tax deduction for voluntary contributions. If you do not meet the work test, you are still able to make a voluntary contribution that will not be claimed as a tax deduction up until age 75, keeping in mind the above caps and your Total Superannuation Balance.
- The minimum age for downsizer contributions remains 55, allowing eligible homeowners to contribute proceeds from the sale of their primary residence to further boost their retirement savings.
- The Superannuation Guarantee rate remains 12% per year.
Strategies to consider
With the expected increases, there may be opportunities to optimise your contributions.
For example:
Maximising non-concessional contributions across financial years
- If your age (under 75) and super balance permit, you may consider contributing $120,000 before 30 June 2026, and then use the new bring-forward rule from 1 July 2026 to contribute a further $390,000 in short succession.
- For couples, this strategy could allow up to $1,020,000 to be contributed to super in less than four months.
Delaying the start of a retirement income stream
- If you are eligible to start an account-based pension, waiting until the new financial year could allow an additional $100,000 to move into the tax-free super retirement environment.
Next steps
These expected increases in super contribution caps are very exciting for those looking to grow their retirement savings in a tax-effective environment.
However, contribution strategies can be complex, particularly when using bring-forward rules, or managing existing bring-forward arrangements, to avoid paying any unnecessary tax.
Before acting, it’s important to understand how these changes apply to your individual circumstances to ensure it is appropriate for your situation.
If you would like to discuss how the upcoming changes may impact your strategy, please contact your local William Buck advisor.
