There is geopolitical chaos that is impacting investment markets and inflation continues to be sticky. Not much good news really, but as I reported in the first editorial of the year, a ray of light shone for superannuants among the gloom of the inflationary figure setback. That was the increase on its way to the general transfer balance cap on 1 July as a result of this unwanted poor data.
Well the new financial year will bring some further good news for super fund members due to a separate set of economic numbers that are linked to the contributions caps. Specifically, the average weekly ordinary time earnings figures, commonly referred to as AWOTE, released in February confirmed there will be a $2500 increase in the concessional contributions cap, bringing it to an annual limit of $32,500 from 1 July, up from the current level of $30,000.
By definition, the non-concessional contributions cap is set at four times the concessional cap. As such, from the beginning of the 2027 financial year the non-concessional contributions cap will rise from $120,000 to $130,000. Of course, this will also affect the bring-forward concessional contribution limits.
It means from 1 July, an individual with a total super balance of less than $1.84 million will be entitled to bring forward three years of non-concessional contributions of $390,000. Further, a person with a total super balance greater than $1.84 million but less than $1.97 million will qualify to use two years of bring-forward non-concessional contributions of $260,000. Finally, a member whose total super balance is above $1.97 million and less than $2.1 million will only be allowed to use the single-year cap of $130,000.
Superannuants should be reminded if they have already triggered the bring-forward provision, they will have to wait until that three-year timeframe has expired before they can enjoy these higher limits. For example, if the bring-forward rules have been used in the 2025 financial year, they will not be able to use these provisions again until the 2028 income year.
Further, SMSF members should acknowledge they will not be able to make any non-concessional contributions if their total super balance is above $2 million now and above $2.1 million after 30 June this year. This is dictated by the general transfer balance cap during the income year in question.
The change being applied to these thresholds should prompt a revision of any contribution strategies currently being considered.
For example, individuals contemplating using the non-concessional contributions bring-forward rules will have to assess whether it would be better to wait until after 1 July to do so, enabling them to put more money into their super fund. To this end, they will need to consider when they will have the cash available to actually do so.
The increase in contributions caps represents another win for superannuants during a period of economic woe and no doubt individuals will welcome any win they can bank right now.