Retirees and pre-retirees should check to see if they are eligibleto make bigger non-concessional contributions this financial year, followingthe indexation of the general transfer balance cap from 1 July 2023 that sawthe cap increase from $1.7 million to $1.9 million due to high levels ofinflation, 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 changesmeans retirees aged between 67 and 75 with a total super balance of $1.7 millionto $1.9 million are now eligible to make further non-concessional contributions*.
“People can now make large contributions into theirsuperannuation in the lead-up to retirement, or even during retirement, as afinal boost, whether they are working or not,” she says.
“This can have a significant impact on retirementsavings, and those who have the ability to transfer up to $1.9 million eachinto a tax-free pension account in retirement should be taking advantage of theopportunity to maximise their position.”
She adds that a surprising number of people aren’t aware they cannow contribute more to their super.
“When we checked the data available through the ATO on super fundcontributions, we found a number of clients who were eligible to make furthercontributions but hadn’t realised it.
“There would be many more people who can take advantage of these changes to putmore money into superannuation and benefit from the tax breaks availablethrough 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 toan increase in the Average Weekly Ordinary Time Earnings. If eligible for a bring-forward arrangement, up tothree times this amount may be able to be contributed.
“Keep in mind that increasing the ability to make non-concessionalcontributions doesn’t necessarily mean people will be able to then transferthese funds into a pension account if they have already commenced a retirementincome stream under the previous transfer balance cap,” Ms Cheeseman-Goodes warns.
People may be able to make other contributions to their super evenif non-concessional contribution capacity has been exhausted because of their totalsuper balance cap of $1.9 million being reached. These contributions include:
1. Concessional contributions, which stillrequire the satisfying of the work test between ages 67 and 75 and arecurrently limited to $27,500 a year but increase to $30,000 a year from 1 July2024.
2. Downsizer contributions can only be used oncebut have no balance cap, with members over age 55 being able to contribute upto $300,000 each within 90 days of the sale of a home that has been owned formore than 10 years.
3. There are also CGT cap contributions that maybe available when selling a small business.
