Superannuation is Changing
Updated: Mar 2
With the indexation of the December 2020 quarter of the Average Weekly Ordinary Time Earnings (AWOTE), the various superannuation caps and thresholds are set to change from 1 July 2021.
The concessional contributions caps are set to change from $25,000 to $27,500 per annum from 1 July 2021.
The non-concessional contributions cap is generally calculated as 4x the concessional contributions cap. Thus, as the concessional contributions have increased to $27,500, the non-concessional contribution caps will increase from $100,000 to $110,000 from 1 July 2021. This will further extend to the bring-forward rule and will increase that from $300,000 to $330,000 from 1 July 2021.
Practical examples of how this will likely impact you.
Under the current rules, you're not able to make a non-concessional contribution to superannuation if your account balance, as at June 30 of the previous financial year, was $1.6M. From 1 July 2021, due to the indexation of AWOTE, the total superannuation balance will increase to $1.7M. Meaning if your superannuation balance is less than $1.7M as at 30 June 2021, you will be able to make a non-concessional contribution into super.
It is also important to consider when to commence an account-based pension, considering that once a transfer balance cap is fully utilised, you do not benefit from any indexations. As a result, it will be beneficial to delay any account-based pensions until 1 July 2021.
Considering the concessional caps have now increased to $27,500, this could play a significant role in using the unused concessional caps. There's now an opportunity to have more in super, from 1 July 2021.
Superannuation is a very complex structure. Getting the right advice is key to ensure you get it right the first time. The information in this article is generic in nature and has not taken into account your personal circumstances. We'd encourage you to speak to us first before you make any personal decisions.