We wish to draw your attention to some important changes in superannuation that create fantastic planning opportunities for your business. These changes haven’t received much publicity so far.
The opportunities/changes we wish to highlight are:
1. Superannuation Contribution caps will increase from 1 July 2021
From 1 July 2021, the superannuation concessional and non-concessional contribution caps will be indexed. The new caps will be:
|Year||Concessional Cap||Non-Concessional cap|
|2021-22||$27,500||$110,000 or $330,000 over 3 years|
The new concessional contributions cap of $27,500 is the total cap on the sum of all:
- employer compulsory contributions plus
- salary sacrifice contributions plus
- personal contributions for which a tax deduction is claimed
The total superannuation balance limit that determines if an individual has a non-concessional contributions cap of nil will also increase from $1.6 to $1.7 million, effective from 1 July 2021.
Individuals who are under 65 years old, may be able to make non-concessional contributions of up to three times the annual non-concessional contributions cap ($110,000 from 1 July 2021) in a single year. It is important to note that if an individual enters into a bring forward arrangement before 1 July 2021, they will not have access to any additional cap space as a result of the increase to the non-concessional cap
2. Superannuation Guarantee percentage will increase to 10% from 1 July 2021
The Superannuation Guarantee, commonly known as the Super Guarantee or SG for short, is the contribution that’s regularly made into your super fund your employer to help bolster retirement savings and supplement the Age Pension. Currently, it is set at 9.5% of your base salary.
The minimum percentage employers are required to pay is set to increase over time, with the next increase to 10% due on 1 July, 2021.
3. Carry-forward of unused concessional contributions
From 2019–20, carry-forward rules allow you to make extra concessional contributions – above the general concessional contributions cap – without having to pay extra tax.
The carry-forward arrangements involve accessing unused concessional cap amounts from previous years. An unused cap amount occurs when the concessional contributions you made in a financial year were less than your general concessional contributions cap.
To use your unused cap amounts you need to meet two conditions:
- Your total super balance at the end of 30 June of the previous financial year is less than $500,000.
- You made concessional contributions in the financial year that exceeded your general concessional contributions cap.
The amount of unused cap amounts you will be able to carry-forward will depend on the amount you have contributed in previous years, starting from 2018–19. You can use caps from up to five previous financial years.
The oldest available unused cap amounts are used first. For example, unused cap amounts from 2018–19 would be applied to increase your cap first before unused cap amounts from 2019–20.
Unused cap amounts are available for a maximum of five years and will expire after this. For example, a 2018–19 unused cap amount which is not used by the end of 2023–24 will expire.
If, after applying all your available unused cap amounts, you still have excess concessional contributions, you may need to pay extra tax.
Contact our office
Please contact us if you have any questions in relation to these changes.