From 1st July 2021, the concessional and non-concessional contribution caps are set to increase due to indexation for the first time since July 2017. The half-yearly AWOTE figure for November 2020 has been published, confirming indexation of the concessional contribution (CC) cap from $25,000 to $27,500.
What are the changes to the contribution caps?
The concessional contribution cap, originally set at $25,000 from 1 July 2017, is indexed by average weekly ordinary time earnings (AWOTE) in increments of $2,500.
With the announcement of the AWOTE figure for the December 2020 quarter, the concessional contribution cap is set to increase from $25,000 p.a. to $27,500 pa from 1 July 2021.
The non-concessional cap in 2021–22 will see the standard cap increased from $100,000 to $110,000 from this date.
In addition, the maximum amount a member who was under 65 at the start of the year can contribute under the non-concessional contribution cap bring-forward rule is also set to increase from $300,000 to $330,000 from 1 July 2021.
Non-concessional contributions are also increasing
This change also results in an increase of the non-concessional contribution (NCC) cap, as it is linked by the tax laws (s.292-85(2) of the ITAA 1997) as four (4) times the CC cap.
This means that the NCC cap increases to $110,000 per year, with the ability to apply the bring-forward up to $330,000.
However, this is subject to both age and a member’s TSB, with increases of the contribution age to 67 without requiring a ‘work test’, and the indexation of the transfer balance cap (TBC) from $1.6 million to $1.7 million from 1 July 2021.
Here’s how a member’s total super balance (TSB) will interact with the increase in the NCC cap:
Need help understanding the new changes?
We know that these changes can be hard to keep up with, and we also know that your understanding of these issues is vital to your security in retirement.
If you have any questions at all, please contact the office at info@leadgroup.com.au and we can assist you.
