Changes from 1 July 2021 will impact on how much money you can contribute to superannuation and how much you can have in your retirement phase superannuation account.
In general, your superannuation is either in an accumulation account (when you are building your super), a retirement account (when you meet preservation age and certain conditions of release and can withdraw your super), or in between when you are transitioning to retirement (when you reach preservation age, are working reduced hours and take some of your superannuation as a pension).
The amount of money you can transfer from your accumulation account into your tax-free retirement account is limited by a transfer balance cap (TBC). From 1 July 2021, the current $1.6m general TBC will be indexed to $1.7m and once indexed, no single cap will apply to all individuals (each person will have an individual TBC between $1.6m and $1.7m).
Indexation will also change other superannuation caps and limits including:
· Non-concessional contributions (contributions from after tax income)
· Concessional contributions (contributions from before tax income such as super guarantee, salary sacrificed super amounts, or contributions you make and claim a tax deduction for etc.)
· Co-contributions (personal contributions made by low and middle income earners matched by the Government up to $500), and
· Contributions you make on behalf of your spouse that are eligible for a tax-offset.
The amount you can contribute to super will increase
Indexation will increase the concessional and non-concessional contribution caps from 1 July 2021. These caps are indexed by average weekly ordinary time earnings (AWOTE).
Cap Current cap Cap from 1 July 2021
Concessional contributions cap $25,000 $27,500
Non-concessional contributions cap $100,000 $110,000
The bring forward rule
The bring forward rule enables you to contribute up to three years’ worth of non-concessional contributions in the one year. That is, from 1 July 2021, you could contribute up to $330,000 to your superannuation in one year. You can use the bring forward rule if you are 64 or younger on 1 July of the relevant financial year of the contribution and the contribution will not increase your total super balance by more than your transfer balance account cap.
If you utilised the bring forward rule in previous years, your non-concessional cap will not change. You will need to wait until your three years has expired before utilising the new cap limit.
1 July 2017 – 30 June 2021 After 1 July 2021
Total Contribution and Total Contribution and
Superannuation bring forward Superannuation bring forward
Balance (TSB) available Balance (TSB) available
Less than $1.4m $300,000 Less than $1.48m $330,000
$1.4m -$1.5m $200,000 $1.48m - $1.59m $220,000
$1.5m - $1.6m $100,000 $1.59m - $1.7m $110,000
Above $1.6m Nil Above $1.7m Nil
Quote of the month
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Adrian De Vito - CPA