Super contribution caps to rise on July 1

Superannuation contribution caps will go up on July 1, after the Australian Bureau of Statistics reported an increase in average weekly ordinary time earnings (AWOTE).

The ABS reported the AWOTE rose 4.5%, seasonally adjusted, in the year to November 2023 - much more than the 0.07% needed to trigger a change in the contribution caps.

From July 1, the concessional contribution cap will rise from $27,500 to $30,000, while the non-concessional cap will rise from $110,000 to $120,000.

It is the first time the caps have been raised in three years.

The caps are indexed to AWOTE in increments of $2500, while the non-concessional cap is set at four times the concessional cap.

Meantime, the three-year bring forward limits will increase from $330,000 to $360,000, unless they have been triggered by June 30, 2024. If they have, then the $330,000 limit will still apply.

The increase does not apply to the $1.9 million total super balance limit, however lower sub-limits will apply due to being based on the contribution caps.

Aware Super's general manager of advice, Peter Hogg, says the increase will be particularly beneficial for older workers as they are more likely to be able to make extra contributions.

The higher caps could also prove valuable to people transitioning to retirement and retirees under 75, he says.

"The higher caps will give them extra firepower to top up their retirement savings and make the most of the favourable tax settings in the super system," he says.

"These settings are in place to help people save for retirement and ultimately take pressure off the taxpayer by reducing demand for the Age Pension, so those who are in a position to make use of the increased limits next financial year should give serious consideration to doing so.

"Wages have been climbing at a relatively quick rate in recent years but contribution caps, because of the way they're indexed, haven't changed since 2021, so really we're playing catch-up.

"With that said, the 2021 increase was the first in four years. The fact we'll now see an increase after three years reflects the strong wage growth we've seen so far this decade."

This article first appeared on Financial Standard

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