Understanding key changes for FY24-25 – Super Contribution caps and beyond

Understanding Key Changes For FY24-25: Super Contribution Caps and Beyond

The 2023/24 Financial year has come and gone, and a new year is upon us. This Financial Year 2024/25 brings with it a raft of changes, from Super contributions caps to tax cuts. This blog has been prepared to provide you with the key points, so you can be across the changes that may benefit you most.

Benefits From Higher Contribution Caps

From 1 July 2024, indexation has been applied to concessional and non-concessional contribution caps. This means there will be more money you can contribute to Super each year.

·         The Concessional Contribution Cap (deductable contributions) will increase from $27,500 to $30,000 per year.

·         The 5-year rolling period for Carry-forward (unused) contribution cap will start at the 2019-20 tax year. For example, if the unused amount for FY19/20 is not used in 2024-25, it will expire.

·         The maximum Carry-forward contribution cap for 2024/25 is $132,500. Employer contributions and personal deductable contributions that have made over this 5-year period will reduce the maximum amount available to you.

·         The $500,000 Total super balance (TSB) threshold still applies when considering eligibility to make Carry-forward concessional contributions. It is important you discuss this threshold with your financial adviser to see if you are eligible.

·         The Non-concessional Contribution Cap (non-deductable contributions) will increase from $110,000 per year.to $120,000 per year.

·         The bring-forward Non-concessional contribution cap, where you can bring forward three financial years’ worth of Non-concessional Contributions, will increase from $330,000 to $360,000.

Key Super contribution caps are summarised in the table

If you would like to check your available contribution caps, you can find these details on the ATO linked services via your myGov portal or ask your accountant for details.

Total Super Balance Thresholds Unchanged

It is important to note, prior to making any Non-concessional contributions that you are able to make these contributions based on your Total Super Balance (TSB). While the contribution caps have increased, the thresholds for eligibility to make these contributions have remained the same. 

It is important that before making any Non-concessional contributions or Bring-forward contributions you speak with your financial adviser and accountant to make sure that you don’t trigger an excess contribution.


Revised Stage 3 Tax Cuts Commence

As of 1 July, Stage 3 tax cuts will come into effect. The revised tax rates and thresholds are listed below;

·        19% tax rate is reduced to 16% 

·        37% tax bracket is retained, but the lower income band is increased from $120,000 to $135,000, and

·        threshold above which the 45% tax rate applies is decreased from $200,000 to $190,000.  

Key Takeaway: With increased after-tax income from these tax cuts, the opportunity is there to use this additional cashflow to contribute to Super and claim a tax deduction. This strategy is made more valuable given the increases to Contribution caps.

Superannuation Guarantee Increase to 11.5%

The Superannuation Guarantee or employer contributions rate will increase from 11% to 11.5%. Clients with existing salary sacrifice arrangements should review the amounts being salary sacrificed to ensure this increase doesn’t push them over the concessional cap. This may be a rare case given that the Concessional Contribution cap has also increased to $30,000 per year.

Transfer Balance Cap Remains at $1.9 million

If you are considering starting an account base pension, it will be of interest to know that the general Transfer Balance Cap (TBC) will remain at $1.9 million in 2024/25. This is the capped amount an individual can have in tax-free pension phase. However, the latest inflation (CPI) figures indicate that the general TBC is expected to index to at least $2 million in 2025/26. Therefore, it should be taken into consideration if there is any benefit in delaying commencing a pension until 2025/26. 

Deeming Rates Freeze Extended Until 30 June 2025

Importantly for clients with Age Pension or Commonwealth seniors Health card entitlements, the deeming rates on financial investments will remain frozen until 30 June 2025. 

Final Thoughts

For clients in accumulation phase, Tax cuts, increased SG contributions and increased contribution caps will provide for some great opportunities to build wealth through super and further reduce tax.

For those nearing retirement there are some key considerations and opportunities to maximise wealth in Superannuation by taking advantage of increased concessional and non-concessional caps, as well as the decision of when to commence an account based pension.

If you would like to discuss any of the points in this blog, please contact the office through the website or by calling 07 3378 9681. 

DisclaimerThe information in this article is general and does not consider your particular circumstances. We recommend specific tax or legal advice be sought before any action is taken and refer to the relevant Product Disclosure Statement before investing in any product. P3 Financial Planning Pty Ltd ABN 61 009 883 292 AFSL 464628