This week our team at Ally Wealth Management is examining the proposed changes to the superannuation contribution caps for the next financial year. Please note that these are just proposals at this stage and are subject to change prior to 1 July 2021.
Proposed increase in the concessional contribution cap
The concessional contribution, which is the amount that is paid into your superannuation account from funds that have not yet been taxed. For Australian residents, this is typically paid by your employer via payroll directly into your superannuation fund. For Australian expats, these contributions can, in many cases, be made on a voluntary basis into your Australian superannuation fund.
The concessional contribution limit is currently A$25,000 per annum, and due to the indexation, this is proposed to increase to A$27,500 per annum from 1 July 2021.
As an example, an Australian expat who is currently working in Singapore for an overseas employer could elect to contribute up to A$27,500 into their Australian superannuation fund. If they had a positively geared investment property in Australia, they may be able to claim the concessional contribution as a tax deduction against their other Australian income to offset the liability here. Be sure to seek advice from your accountant here to consider if this strategy is right for you.
Increase in the non-concessional contribution cap
Non-concessional contributions are those additions that you can voluntarily make into your superannuation fund from your after-tax funds. This is available to both Australian residents and expats with an Australian superannuation fund who can take advantage of the non-concessional contribution limit.
The current non-concessional contribution limit is A$100,000 per annum, which is proposed to increase to A$110,000 per annum from 1 July 2021. This also means that the amount that is contributed in one year with the ‘bring-forward provisions is expected to increase to A$330,000 from 1 July, from the current level of A$300,000. This could be a welcome boost for both Australian residents and expats seeking to boost their superannuation balance.
As an example, a 58-year-old Australian expat couple repatriating to Australia could elect to contribute up to A$330,000 each from 1 July 2021 this year, which would allow them to contribute up to A$660,000 to their superannuation accounts.
Increase in the total super balance cap
The Total Super Balance Cap, which is the balance that limits the amount of non-concessional contributions that can be made into your superannuation fund. This limit is currently A$1.6M, and from 1 July 2021, is expected to increase to A$1.7M. This will allow anyone with a total super balance of less than $1.7M from 1 July 2021 to make a non-contribution of A$110,000 for the financial year they qualify.
For those individuals that qualify for the bring-forward rule, there is also an increase in the amounts that can be contributed balance on their balance. These limits are outlined in the table below:
These announcements from the Australian Tax Office (ATO), if approved, will come as welcome news for Australian expats and residents when it comes to planning for their retirement. If you have any questions about how these changes impact you and your plans for retirement, feel free to reach out to our team at Ally Wealth Management for an obligation-free discussion.
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General Advice Warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.