Further changes to super contributions in 2024-25
Non-concessional super contributions
Today, I will be talking about the second type of contribution to super, which is non-concessional and what changes are to be introduced from 1st July 2024.
What are non-concessional contributions
Non-concessional contributions to super refer to the voluntary contributions made to super from after-tax income or savings. Those are the contributions when you do not claim tax deductions, therefore, the full value of your contribution is being invested in the superannuation, unlike concessional contributions where 15% contribution tax is being charged on the balance contributed (up to allowable limits).
You can make non-concessional contributions from various sources, including personal savings, inheritance, proceeds from the sale of assets, or even gifts or financial wins.
What are the benefits of non-concessional contributions?
Full balance of your contribution is being invested
Non-concessional contributions create your “tax-free” superannuation component
Those contributions can really boost your retirement savings
Flexibility of contributions
Changes to be introduced from 1st July 2024
Over the years, the government started reducing our ability to make non-concessional contributions.
Considering that once those savings are moved to a pension, the tax-office will not see even $1 in tax paid from all pension funds, and there will be only more and more retirees with those tax-free pensions, no wonder that the government started getting worried and started reducing how much money we can contribute to super and then transfer to pensions.
There was a big reduction in contributions limit in 2017-18, from $180,000 a year prior down to $100,000.
From 2020-21 the limit has been increased in line with average weekly ordinary time earnings. But remember, if you pay more then the limit, you might have to pay extra tax. You can see from the table that in the current financial year 2023-24 the annual cap limit is $110,000.
From 1st July 2024 however, this limit is being increased up to $120,000.
What’s more, you might also be able to use the “bring-forward” strategy. If eligible, you might bring forward either 2 or even 3 years of non-concessional contributions, allowing you to make a contribution up to $360,000 in one go, subject to the total superannuation balance cap. And this is where contributions to super are becoming complex, therefore you should seek financial advice.
This is what working with the financial planner is all about. Investing money and choosing investments in only a small part of financial planning advice, creation of the most appropriate strategy that includes your superannuation and retirement planning, together with tax planning and estate planning put together.
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Katherine Isbrandt of About Retirement
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Further changes to super contributions in 2024-25
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