The Australian superannuation regime is about to change once again, with contributions caps set to rise from 1 July 2024. While this adjustment may appear straightforward, understanding its interaction with the General Transfer Balance Cap, total superannuation balance and its implications for retirement planning is crucial.
The current framework for superannuation contribution caps was established in 2017, ushering in a new era where non-concessional contribution limits became tied to an individual’s Total Superannuation Balance (TSB). Where the individual’s total superannuation balance exceeds the general transfer balance cap, non-concessional contributions are no longer allowed.
In recent years, contribution caps have seen minimal adjustments, primarily reflecting changes in average wages rather than inflation.
With the release of the latest average wages figures by the Australia Bureau of Statistics in December 2023, the concessional and non-concessional contribution caps are set to increase as shown below:
| Annual cap | 1 July 2021 to 30 June 2024 | From 1 July 2024 |
| Concessional contributions | $27,500 | $30,000 |
| Non-concessional contributions | $110,000 | $120,000 |
The disconnect between contributions caps and the general transfer cap
An increase in contribution caps should translate into greater flexibility for individuals to bolster their retirement savings. Whether through salary sacrificing, personal deductible contributions, or non-concessional contributions, individuals now have an opportunity to contribute more towards securing their financial future.
However, many individuals may find themselves unable to fully leverage these increases due to the general transfer cap.
Unlike contribution caps, the general transfer balance cap is based on inflation (not wages) and remains unchanged at $1.9 million. This disparity introduces complexities that individuals must navigate carefully. While they might have the capacity to contribute more, they could find themselves restricted by the limitations imposed by their personal Transfer Balance Cap, potentially hindering their retirement planning strategies.
Implications for bring-forward contributions
These changes will also impact individuals seeking to make use of the bring-forward non-concessional contribution rules. A bring-forward arrangement allows an individual to make up to three years’ worth of non-concessional contributions in a single year, without any excess contributions tax implications.
Eligibility for the bring-forward rules hinges on an individual’s TSB and when the bring-forward rule was last triggered by the individual. Importantly, the amount of the non-concessional contribution that can be brought forward is subject to the proximity of the individual’s TSB to the general Transfer Balance Cap.
This is best illustrated in the following table:
| TSB threshold (as at 30 June 2024) | Bring-forward Non-Concessional Contributions Cap |
| Less than $1.66m | $360,000 |
| $1.66m to less than $1.78m | $240,000 |
| $1.78m to less than $1.9m | $120,000 |
| $1.9m or more | Nil |
From 1 July 2024, it is crucial for individuals to carefully review their TSB to ensure they are eligible to make the non-concessional contribution without incurring inadvertent excess contributions tax. This is particularly important since the contribution caps will increase, but the General Transfer Balance Cap will remain the same heading into the new year.
For individuals with self-managed superannuation funds, the fund trustees bear an even greater responsibility to ensure that assets reflect market value, with appropriate substantiation and evidence, by 30 June 2024. This is especially crucial for those relying on year-end balances when formulating their retirement plans.
Next Steps
It’s important to reassess your contribution strategies to ensure compliance with the existing superannuation limits. It’s also crucial that you ensure the bring-forward rules have not already been accessed in recent years. Failure to do so could result in unintended tax implications or other penalties. Given these changes, it’s imperative for you to review your superannuation strategy before 1 July 2024.
Consulting with an advisor can provide clarity on how best to optimise contributions within the confines of the existing transfer balance rules. By taking proactive steps and seeking professional guidance, you can ensure they’re making the most of these changes to secure a comfortable retirement.
Contact a William Buck advisor if you have questions or need advice on how the updated contribution caps could apply to you.
