Retirees and pre-retirees should check to see if they are eligible to make bigger non-concessional contributions this financial year, following the indexation of the general transfer balance cap from 1 July 2023 that saw the cap increase from $1.7 million to $1.9 million due to high levels of inflation, says Prue Cheeseman-Goodes, wealth management director at HLB MannJudd Sydney.
The Federal Government also abolished the work test from 1 July2022, which previously required a person over age 67 to be working to makepersonal non-concessional contributions until age 75.
Ms Cheeseman-Goodes says the combination of these two changes means retirees aged between 67 and 75 with a total super balance of $1.7 million to $1.9 million are now eligible to make further non-concessional contributions*.
“People can now make large contributions into their superannuation in the lead-up to retirement, or even during retirement, as a final boost, whether they are working or not,” she says.
“This can have a significant impact on retirement savings, and those who have the ability to transfer up to $1.9 million each into a tax-free pension account in retirement should be taking advantage of the opportunity to maximise their position.”
She adds that a surprising number of people aren’t aware they can now contribute more to their super.
“When we checked the data available through the ATO on super fund contributions, we found a number of clients who were eligible to make further contributions but hadn’t realised it.
“There would be many more people who can take advantage of these changes to put more money into superannuation and benefit from the tax breaks available through non-concessional contributions.”
The non-concessional contribution cap for the year ended 30 June2024 is $110,000 and will increase to $120,000 a year from 1 July 2024, due to an increase in the Average Weekly Ordinary Time Earnings. If eligible for a bring-forward arrangement, up to three times this amount may be able to be contributed.
“Keep in mind that increasing the ability to make non-concessional contributions doesn’t necessarily mean people will be able to then transfer these funds into a pension account if they have already commenced a retirement income stream under the previous transfer balance cap,” Ms Cheeseman-Goodes warns.
People may be able to make other contributions to their super even if non-concessional contribution capacity has been exhausted because of their total super balance cap of $1.9 million being reached. These contributions include:
- Concessional contributions, which still require the satisfying of the work test between ages 67 and 75 and are currently limited to $27,500 a year but increase to $30,000 a year from 1 July2024.
- Down sizer contributions can only be used once but have no balance cap, with members over age 55 being able to contribute up to $300,000 each within 90 days of the sale of a home that has been owned for more than 10 years.
- There are also CGT cap contributions that maybe available when selling a small business.
