With the new financial year upon us, it's essential to be aware of the upcoming changes to superannuation rates and rules, including the increase to the Superannuation Guarantee (SG) rate and adjustments to super contribution caps. Understanding these changes can help you make more informed decisions about your retirement savings.

Key Takeaways

1. From 1 July 2024, the SG rate, which determines the minimum percentage of your salary that your employer must contribute to your super fund, will increase from 11% to 11.5%.

2. The cap on concessional (before-tax) super contributions will rise from $27,500 to $30,000 per year.

3. The non-concessional (after-tax) super contributions cap will increase from $110,000 to $120,000 from the 2024-25 financial year.

Super Guarantee (SG) Rate Rise

If you are employed in Australia and meet the eligibility requirements, your employer is required to pay superannuation on your behalf. This is in addition to your annual salary and is known as the Superannuation Guarantee (SG).

Starting from 1 July 2024, the SG rate will increase from 11% to 11.5%. This incremental rise is part of a broader plan, with the SG rate set to reach 12% by 1 July 2025. This increase is designed to help Australians build a more substantial retirement fund over their working life.

Changes to Super Contributions Caps

One effective strategy to boost your retirement savings is to make additional contributions to your superannuation while you're still working. These contributions can be made on a before-tax (concessional) or after-tax (non-concessional) basis.

The good news is that from 1 July 2024, the limits on super contributions are going up. This provides a greater opportunity to enhance your super savings and secure a more comfortable retirement.

Concessional (Before-Tax) Contributions Cap

Concessional contributions include compulsory super contributions made by your employer, salary sacrifice arrangements, and personal contributions that you claim as a tax deduction. There is a cap on concessional contributions, which is the maximum amount you can contribute to your super each year without incurring a higher tax rate.

For the 2024-25 financial year, the concessional contributions cap will increase from $27,500 to $30,000. This means you can contribute more to your super while taking advantage of tax benefits.

Carry Forward Concessional Contributions

If you've had periods out of the workforce or haven't been able to make significant super contributions in the past, you might benefit from the carry forward concessional contributions, also known as catch-up contributions.

To be eligible, your total super balance at 30 June of the previous financial year must be less than $500,000. If you qualify, you can use any unused concessional contribution caps from the past five financial years in addition to the annual cap. This can be particularly advantageous if you have increased income and want to claim a larger tax deduction.

Non-Concessional (After-Tax) Contributions Cap

Starting from 1 July 2024, you can contribute more to your super with after-tax contributions, as the cap will increase from $110,000 to $120,000 per year. These contributions are made from your after-tax income, including savings or take-home pay.

To be eligible for making after-tax contributions, you must be under 75 years old, and your total super balance at 30 June of the previous financial year must be less than $1.9 million.

Non-Concessional Contributions Bring Forward Rule

The bring forward rule allows you to make up to three years' worth of non-concessional contributions in a single year, enabling you to contribute more to your superannuation. The total amount you can bring forward depends on your total super balance at the end of the previous financial year.

For example, in the 2024-25 financial year, if your total super balance is less than $1.66 million at 30 June 2024, and you haven’t triggered the bring forward rule in the previous two financial years, you can contribute up to $360,000, which is three times the annual cap. If your balance is between $1.66 million and $1.78 million, the cap is $240,000, and if your balance is between $1.78 million and $1.9 million, you can contribute up to $120,000.

In need of a review?

Superannuation rules can be complex, and it's easy to feel overwhelmed. Speaking with a financial adviser can provide peace of mind and ensure you make the most of your super contributions. If you’re already a client, reach out to your adviser for personalised guidance on these changes. If you don’t have a financial adviser, consider booking a complimentary chat with one of our experts to get started.

As we move into the new financial year, staying informed about these changes and seeking professional advice when needed can help you optimise your retirement savings and achieve a more secure financial future.