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Contribution caps from 1 July 2024 confirmed – advice considerations

Article published on: 22-02-2024

The annual concessional contribution (CC) and non-concessional contribution (NCC) caps will increase to $30,000 and $120,000 respectively on 1 July 2024. This follows the release of the AWOTE figure for December 2023.

There are a number of opportunities to make additional voluntary CCs and NCCs before and after 30 June this year and related advice considerations. The appropriate timing of contributions will depend on a number of factors, such as a client’s:

age and birthdate
taxable income
total super balance (TSB) on 30 June (2023 and 2024)
CC and NCC cap space
surplus cashflow and other issues.

Note: The indexation of the CC and NCC caps is determined after applying AWOTE figures to the legislative formula. However, advice recommendations should only be made after the ATO formally confirms key super rates and threshold for 2024/25.

NCC advice considerations and opportunities

Consider TSB when making NCCs

The annual NCC cap is increasing from $110,000 to $120,000 from 1 July 2024. For higher balance clients, the ability to make NCCs and use the NCC bring forward rules are limited by their TSB. The 2023/24 and 2024/25 caps and thresholds are shown in the following tables. The reduced NCC bring forward thresholds make it important to check your clients’ 30 June 2024 TSB to determine eligibility for NCC opportunities in 2024/25.

Table 1: TSB thresholds and bring forward caps for 2023/24

TSB at prior 30 June 2023	NCC cap
$1.9m +	$0
$1.79m to < $1.9m	$110,000
$1.68m to < $ 1.79m	$220,000
< $1.68m	$330,000

Table 2: TSB thresholds and bring forward caps for 2024/25

TSB at prior 30 June 2024	NCC cap
$1.9m +	$0
$1.78m to < $1.9m	$120,000
$1.66m to < $ 1.78m	$240,000
< $1.66m	$360,000

Complete an existing bring forward period

Clients aged less than 75 with remaining NCC bring forward amounts will be eligible to contribute their remaining cap space in 2023/24, if:

they triggered the bring forward in 2021/22 or 2022/23, and
their TSB was less than $1.9m on 30 June 2023.

Clients who triggered a bring-forward in either 2022/23 or 2023/24 don’t gain access to the increased NCC cap in 2024/25. This is because the maximum NCCs that can be made under a bring forward are determined in the financial year the bring forward is triggered.

Consider timing when triggering new bring forward

Clients who are in their final financial year of eligibility (either because of their age or TSB), can maximise their available NCCs by triggering the bring forward before 30 June. For other clients, delaying the triggering of the bring forward will generally enable them to maximise NCCs. The tables below outline some alternative sequences where a client has a timeframe of three or four years and assumes they are eligible to contribute each year.

Table 3: Three years to make NCCs

	2023/24	2024/25	2025/26	Total
Option 1	$330,000	$0	$0	$330,000
Option 2	$110,000	$360,000	$0	$470,000
Option 3	$110,000	$120,000	$360,000	$590,000

Option 3 allows for the maximum NCCs at $590,000 by contributing up to the annual cap in the first two years and delaying triggering the bring forward contribution until year three.

Table 4: Four years to make NCCs

	2023/24	2024/25	2025/26	2026/27	Total
Option 1	$110,000	$360,000	$0	$0	$470,000
Option 2	$110,000	$120,000	$360,000	$0	$590,000
Option 3	$330,000	$0	$0	$360,000	$690,000
Option 4	$110,000	$120,000	$120,000	$360,000	$710,000

Option 4 maximises NCCs at $710,000 by contributing up to the annual cap in the first three years and delaying triggering the bring forward contribution until year four.

Withdrawal and re-contribution (or transfer to spouse)

Clients aged less than 75 may benefit from using the re-contribution and/or spouse contribution strategy. The client must have enough unrestricted non-preserved super to make a lump sum withdrawal. They also need to recontribute the withdrawn amount into their super or to their spouse’s super as an NCC. Some key benefits include:

using multiple bring forward periods for those aged between 65 and 75 to maximise the tax free component, with no requirement to meet the work test
reducing or eliminating the tax to be paid by non-tax dependant beneficiaries on any death benefit lump sum after the client passes away, and
maximising the combined amount a couple can invest in retirement phase pensions.

CC advice considerations and opportunities

Greater tax benefits for middle to higher income earners (in 2023/24)

Making voluntary CCs (personal deductible contribution or salary sacrifice) in 2023/24 may provide a greater tax benefit if made before the proposed changes to Stage 3 tax cuts commence on 1 July this year (if passed), by individuals with a taxable income between:

$45,000 and $135,000, and
$180,000 and $190,000.

Table 5: Tax savings of voluntary $10,000 CC in 2023/24 vs 2024/25

Taxable income	Marginal rate in 2023/24	Net tax saving on $10,000 CC	Marginal rate from 1/7/2024	Net tax saving on $10,000 CC	Additional tax saving by making CC in 2023/24
$80,000	34.5%	$1,950	32.0%	$1,700	$250
$135,000	39.0%	$2,400	32.0%	$1,700	$700
$160,000	39.0%	$2,400	39.0%	$2,400	$0
$190,000	47.0%	$3,200	39.0%	$2,400	$800

Use it or lose it - Unused CC cap amounts from 2018/19 (in 2023/24)

Clients with a TSB of less than $500,000 on 30 June 2023 and unused CCs from the five prior financial years may be eligible to make catch-up CCs. Unused CC cap amounts from 2018/19 will be lost if not used by 30 June 2024. A client must exceed the annual CC cap to utilise their unused CC amounts, and amounts are deducted from the earliest financial year to the latest. Refer to our article ‘Don’t miss out on carry-forward concessional contributions’ for additional information.

Table 6: Annual CC cap since 2018/19

2018/19	2019/20	2020/21	2021/22	2022/23	2023/24	2024/25
$25,000	$25,000	$25,000	$27,500	$27,500	$27,500	$30,000

Additionally, if a client’s TSB is approaching $500,000, consider taking advantage of catch-up CCs, as they may be unable to use it in subsequent financial years if their 30 June TSB is equal to or greater than $500,000.

Utilise higher CC cap and increased after-tax income (in 2024/25)

Given the annual CC cap is increasing to $30,000, the maximum CCs a client could make in 2024/25 is $162,500 under the catch-up CC provisions (assuming no CCs in the current or five prior financial years). This includes unused CC amounts from 2019/20 to 2023/24, plus the annual CC cap in 2024/25 (see table above).

Clients may be able to take advantage of the increased caps if they have more disposable income when the proposed tax cuts start. Clients who sell investments may reduce any capital gains through making personal deductible contributions. Also consider the increase in the super guarantee to 11.5%, which is included in the CC cap.

Other advice considerations and opportunities

There are many other considerations when recommending contribution strategies, such as:

consider the impact of current year contributions on the client’s TSB to ensure they can maximise contributions in future years
check if the client meets a relevant condition of release if the client needs access to funds in the near future
confirm the client meets contribution eligibility criteria prior to recommending contributions, eg age requirements, work test (for PDCs only), valid notices etc
consider the impact of the contribution on other thresholds and if other contribution strategies may be more appropriate, eg contribute to spouse’s super if balance will exceed TBC
consider management of TSB for large balance clients in light of the proposed $3m super cap slated to commence 1 July 2025 (if passed), eg re-contribution or splitting contribution to spouse’s interest
review salary sacrifice arrangements and spouse contribution splitting recommendations to optimise future contribution opportunities, and
educate high income clients about potential changes to their Division 293 tax liability (Div 293 tax is levied on CCs within the person’s CC cap and may be higher if the client uses catch-up CCs).

How do I help a client track their contributions and TSB?

An individual can track the contribution and TSB information through their product provider or their MyGov account. Clients can download relevant summaries to help with the provision of financial advice. The following client-friendly articles step through the process of accessing this information from myGov:

More information

For more information, please refer to some of our relevant adviser guides and articles below:

Concessional contributions

Non-concessional contributions

Total super balance

TSB fundamentals and impact on contributions

This communication is prepared by Actuate Alliance Services Pty (ABN 40 083 233 925, AFSL 240959), a related entity of MLC Wealth Limited (ABN 97 071 514 264). This is for financial adviser use only – it is not to be distributed to clients. The communication has been prepared to provide financial advisers with technical resources, support and knowledge. The information in this document is current as at the date of publication and reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue, and may subject to change. In some cases, the information has been provided to us by third parties. Whilst care has been taken in preparing this document, no liability is accepted for any errors or omissions in this document, and loss or liability arising from any reliance on this document. Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we therefore recommend your client consult with a registered tax agent.