Increased Super Contributions from 1 July
The amount that you can contribute to superannuation, or have contributed to superannuation on your behalf, will increase from 1 July 2014. The relevant caps have increased in line with movements in Average Weekly Ordinary Time Earnings (AWOTE).
Please be aware that you must satisfy eligibility criteria before superannuation contributions can be made for you or by you.
Concessional (Tax Deductible) Contributions
The general cap will increase from $25,000 to $30,000 on 1 July.
This cap applies to employer superannuation contributions (including salary sacrifice contributions) and self employed contributions (conditions apply, in particular the “under 10% income from employment rule”).
$35,000 Concessional Cap for Older Taxpayers
This temporary cap has not increased (and will not increase).
However the age limit will drop from those who were aged 59 years or over on 30 June 2013 to those who will be aged 49 years or over on 30 June 2014.
Concessional (After Tax) Contributions
The non-concessional cap increases from $150,000 to $180,000 (ie 6 times the concessional cap).
Under the “three year bring forward rule” you can make up to three years worth of non-concessional contributions in the first year of a three year cycle. This rule only applies if you are under age 65 at any time during the first year of the bring forward period.
Planning for the Three Year Bring Forward Rule
In order to maximise non-concessional contributions under the bring forward rule you could contribute:
- Up to $150,000 in the 30 June 2014 year (providing you have not previously triggered the bring forward rule); and
- Up to $540,000 from 1 July 2014
These amounts assume there are no excessive concessional contributions in recent years.
In contrast, the maximum you can contribute under the bring forward rule in the year ending 30 June 2014 is $450,000 with no further non-concessional contributions possible until July 2016.
A strong warning against excess contributions!
The penalties for breaching the contributions caps are severe. They can include total tax rates of up to 93%.
Particular care is required if you are planning to use non-concessional caps and you have benefitted from significant superannuation contributions in the last three years as you may have already triggered the “three year bring forward rule”. Please contact us if you require more information.
CGT Cap Amount
This will increase from $1.315 million to $ 1.355 million.
Superannuation Guarantee Charge (SGC)
The maximum SGC contribution base will increase to $49,430 per quarter on 1 July (up from $48,040 per quarter).
The SGC contribution rate is currently legislated to increase to 9.5% from 1 July 2014.
As part of the proposed repeal of the Mining Tax, a bill was introduced into Parliament to pause the SGC contribution rate at 9.25% for a further two years. At the time of writing this proposed change had not become law – it had been defeated in the Senate.
Employers should confirm next year’s SGC contribution rate before 30 June.
The superannuation rules are complex and are continually changing. Please don’t hesitate to contact us to discuss your particular circumstances and strategies.