Squeezing money into super
Something that has flown under the radar is the fact concessional contributions, currently pegged at $30,000 a year, will rise to $32,500 giving taxpayers more scope to reduce their overall annual tax bill.
The Australian Bureau of Statistics recently released figures showing average weekly ordinary times earnings have increased which in turn will prompt an increase in concessional contributions, the first since 2024.
Concessional contributions are pre-tax payments that include the 12 per cent Superannuation Guarantee plus any additional voluntary contributions, such as those made via salary sacrifice or personal contributions where a tax deduction is claimed.
Given this change it has never been more important if you are earning a high income to proactively contact your tax agent before the end of the year to determine if you can reduce your overall tax bill by boosting your concessional contributions.
In addition, the non-concessional contribution cap is set at four times the concessional cap and so this change means the non-concessional cap also increases from $120,000 a year to $130,000 a year.
Under the 3-year bring forward rule, it means you can put up to $390,000 into super into any one year, although you can’t make another non-concessional contribution for two financial years.
These changes are particularly important for anyone dealing with an inheritance or considering what to do with the proceeds from the sale of an investment property and remain unsure whether they can or should contribute these funds to super.
From next financial year, it will be possible to contribute $32,500 as a concessional contribution and up to $390,000 as a non-concessional contribution or a total of $422,500 to super in one hit. If you are part of a couple, that would double to $845,000.
As with all things relating to super, these contribution caps are impacted by the balance you have in super and in the case of concessional contributions, whether you pass the work test.
All contributions, with the one exception of downsizer contributions which can be made at any age, must be made before you turn 75.