From 01 July 2021, concessional (pre-tax) and non-concessional contributions caps are going up.

For concessional contributions, the maximum limit increases to $27,500 for the 2021-2022 financial year (up from $25,000).

Reviewing your salary sacrificing strategy to take advantage of the increased cap could be worthwhile, remembering that the superannuation guarantee (contributions from your employer) will increase to 10% from 01 July 2021 – automatically increasing your concessional contributions. 

Non-concessional contributions will increase by a similar 10% to $110,000 for 2021-2022, and will include the three-year bring-forward rule that allows up to $330,000 in contributions in a single year, under certain circumstances.

The bring-forward rule is available to individuals under 65 years old, with a total superannuation account balance of less than $1.7 million (as at 01 July 2021). If you have a total of $1.7 million or more in super, you are not permitted to make any non-concessional contributions.

The amount of bring-forward contributions permitted is on a sliding scale, dependent on your super balance: 

• $330,000 with a balance of less than $1.48 million
• $220,000 with a balance of $1.48 million to less than $1.59 million
• $110,000 with a balance of $1.59 million to less than $1.70 million

This change presents an opportunity to inject up to an extra $30,000 (above what was available in 2020-2021) into super at a lower tax rate. 

The government has previously announced its intention to lift the age restriction to access the bring-forward rule to 67, but that has still not been passed into legislation. So it will likely be a ‘wait and see’ game before more people are eligible to make greater non-concessional contributions.

It may not come into effect until 01 July 2022, but the age limit to access downsizer contributions will be lowered to 60 years of age (currently 65). 

Downsizer contributions give the ability to make special extra contributions of up to $300,000 (or $600,000 in total for a couple) from the proceeds of selling the family home. The rules allow anyone who meets the age AND downsizer eligibility criteria (we suggest you seek advice on this) to make a downsizer contribution, no matter how much money they already have in super. 

If you’re in the 60 – 65 age bracket and you’re thinking of selling your home, it might be best timed to do so after 01 July 2022 and take advantage of the downsizer contribution. 

There could also be a perfect storm on the horizon, with downsizer and bring-forward contributions both being available to people in the 60 – 65 range (or even older if the government increases the bring-forward age). For some, that could mean a double-shot of contributions – but timing and planning will be critical to ensure your total super balance doesn’t tip the scales of ineligibility. 

There are some interesting months ahead around superannuation contributions, and much of the opportunity will be dependent on sound financial advice that aligns with the various eligibility rules, otherwise financial penalties can apply for exceeding contributions limits.

If you think you might be able to take advantage of these new superannuation rules, but it all gets a bit too confusing, our financial planning experts can help.

Just get in touch with Pat Kelly or Jenny Kitching and they can give you some clarity and direction around where you can take advantage of your super to build real retirement wealth.