From the 1st July 2021, an increase of the caps of both concessional and non-concessional superannuation contributions will come into effect. The new concessional cap will be $27,500 for the 2021-2022 year, and the non-concessional cap will become $110,000, or $330,000 over the course of three years.
There will also be an increase from $1.6 million to $1.7 million of the total superannuation balance limit that will determine whether an individual has a non-concessional contributions cap of nil. This is also to become effective as of 1st July 2021.
If you’re unsure, a concessional superannuation contribution is a payment made into your superannuation fund before tax and is tax-deductible for self-employed individuals. However, these contributions are taxed at 15% once they are received into your super fund.
In contrast, non-concessional superannuation contributions are payments put into your retirement fund that have already been taxed. As you have already paid tax on the money, it will not be taxed again as you enter it into your super fund.
The ATO has recently released information on the cap increase and advice pertaining to actions potentially taken by you. However, suppose you are looking at making additional contributions to your self-managed super fund (SMSF). In that case, the ATO recommends that you consider talking to a tax professional and financial advisor, such as us here at Prosperity Accountants, to do things properly.
As it stands, individuals who are under the age of 65 may be able to make non-concessional contributions of up to three times the annual cap of $110,000 in a single year. This is why there is a clause of $330,000 over a period of 3 years.
It is also important to be made aware that if you are looking at bringing forward such arrangements before the 1st July 2021, then you will not have access to the additional cap space that will be made available.
If you have any questions, do not hesitate to get in touch with one of our experienced and knowledgeable accountants to assist you with your enquiries. It is imperative that you ensure your SMSF is managed adequately for you to see positive investment returns for your future. We can guide you on making the right moves to secure yourself for retirement. Call us on 08 9443 5199 or fill out our contact form.