Superannuation Cap Changes Coming Soon
Financial Advice

Superannuation Cap Changes Coming Soon

MB+M Business Services Team Update – Superannuation Cap Changes Coming Soon

For the first time in 4 years a number of superannuation rates and thresholds are increasing. This is good news for those saving for retirement though it does throw a number of new complexities for those who have existing pensions in place.

Contribution caps
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From 1 July 2021, the concessional and non-concessional contribution caps are set to increase due to indexation for the first time since July 2017.

The concessional contribution cap, originally set at $25,000 from 1 July 2017, is indexed by average weekly ordinary time earnings (AWOTE) in increments of $2,500.

With the announcement of the AWOTE figure for the December 2020 quarter, the concessional contribution cap is set to increase from $25,000 p.a. to $27,500 pa from 1 July 2021.

“Australians will be able to put more into their super as the concessional and non-concessional contribution caps and the general transfer balance cap are set to increase due to indexation for the first time since July 2017,” minister for women’s economic security, superannuation, financial services and the digital economy Jane Hume said.

Concessional contributions are made to super funds before tax and taxed at a rate of 15% inside super funds.

The cap for non-concessional contributions, which are made to super funds after tax has been paid, will also increase from July.

From 1 July 2021, the non-concessional contribution cap will increase from $100,000 to $110,000.

The ATO has also increased the transfer balance cap, the limit on how much super can be transferred to a tax-free retirement account, from $1.6 million to $1.7 million.

No other contribution caps have been changed as a consequence.

Super guarantee (SG)
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The SG maximum contribution base will increase in 2021/22 to A$58,920 per quarter and A$235,680 per year, up from A$57,090 and A$228,360 respectively. The maximum super contribution base is used to determine the maximum limit on any individual employee’s earnings base for each quarter of any financial year. Employers do not have to provide the minimum support for any part of the earnings exceeding this limit.

Also, the SG is due to increase from 9.5% per year to 10% from 1 Jul 2021; however, the government has flagged that it may review this in the upcoming 2021-2022 budget to be delivered on 11 May.

Super Co-contribution
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Super co-contributions help eligible people boost their retirement savings.

If you’re low or middle-income earner and make personal (after-tax) contributions to a super fund, the government may also make a contribution (called a co-contribution) up to a maximum amount of $500.

The amount of government co-contribution received depends on income and how much individuals contribute.

There is no need to apply for the super co-contribution. When an individual lodges a tax return, we will work out if they are eligible. If the super fund has an individuals tax file number (TFN) we will pay the contribution to your super account automatically.

Co-Contribution Lower and Upper Threshold Table

YearMaximum entitlementLower income thresholdHigher income threshold
2021–22$500$41,112$56,112
2020–21$500$39,837$54,837

 

Super benefits
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The key superannuation rates and thresholds provide that for 2021–22:

  • the non-concessional contributions cap is $110,000
  • Increase in concessional contribution cap to $27,500 coming
  • the Capital Gains Tax cap amount for non-concessional contributions is $1.615 million
  • the Lump sum low rate cap – $225,000 (up from $215,000)
  • the maximum super contribution base is $58,920 per quarter
  • the ETP cap amount – $225,000 (up from $215,000)
  • the general transfer balance cap is $1.7 million
  • the defined benefit income cap is $106,250
  • the employment termination payments cap amount for life benefit termination payments and death benefit termination payments is $225,000, and
  • the base limit of the tax-free part of genuine redundancy payments and early retirement scheme payments is $11,341, and for each complete year of service is $5,672.

We Are Here To Help…
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Our Business Services team is available to discuss how MB+M can help you work through these changes provide such an environment and how you can do this in a cost effective manner for your business. Call 03 58219177 and speak with a well versed Business Advisor. 

ATO: Contribution caps
Canstar: Superannuation Guarantee and rate changes: Key things for employees to know
ATO: Key super rates and thresholds

 

 

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