There is more good news for everyone looking to grow their superannuation balance. In addition to the general transfer balance cap increasing from $1.6 million to $1.7 million, the concessional and non-concessional contribution caps are also set to increase from 1 July 2021.
The concessional contribution cap will increase from $25,000 to $27,500 from 1 July 2021. The non-concessional cap (calculated at 4 times the concessional cap) will increase from $100,000 to $110,000. The increase in the caps will allow additional funds to be deposited into a concessionally taxed environment and further grow superannuation benefits.
The concessional contribution cap is indexed to average weekly ordinary time earnings (AWOTE), in increments of $2,500. December 2020 quarter results released Thursday 25 February 2021, set the increase for the next financial year.
How does this impact the bring-forward rule?
Under the bring-forward rule, individuals who are under 65 at the start of the year can ‘bring-forward’ 3 years’ worth of the non-concessional contribution cap. This will increase from $300,000 to $330,000 from 1 July 2021. However, individuals who have already triggered the bring-forward rule cannot make extra non-concessional contributions and are limited to the $300,000 cap until their bring-forward period expires.
We note, still awaiting royal assent is the proposed extension of the bring-forward rule to individuals who are under 67 years of age. The effective date if it does become law will be 1 July 2020.
With the increase in both the transfer balance cap and concessional contribution cap, it is important individuals review and update their current superannuation strategies as soon as possible.
Please contact our superannuation team, or your relationship partner who can assist in optimising your superannuation strategy.
