The government recently made changes to the annual superannuation contribution caps as well as confirming that Stage 3 tax cuts will come into effect on 1 July 2024.

The below is a summary of the changes which should be reviewed by individuals to ensure their current strategy remains appropriate, and to benefit from any strategic opportunities created by the recent changes.

Increase to contribution caps from 1 July 2024

The key super contribution caps have been indexed and will increase from 1 July 2024 as summarised in the table below. This may allow individuals to contribute more in 2024/25.

Individuals are encouraged to review their existing contribution arrangement or speak with a financial adviser to determine if they are eligible and can benefit from the changes.

Consider Superannuation Guarantee (SG) increase from 1 July 2024

The Superannuation Guarantee (SG) contribution rate will increase to 11.5% from 1 July 2024 (and to 12% on 1 July 2025).

While most employees will receive additional SG contributions, those under a ‘total employment cost’ arrangement may have their cash salary reduced to offset the increase in SG payments.

Small business owners should review their systems to ensure they are meeting their obligations to their employees based on the increased rate.

Individuals with existing salary sacrifice arrangements at 1 July 2024 should review the amount sacrificed and their salary sacrifice agreement, to take in to account the increased SG rate and increased concessional contribution cap.

Benefit from greater tax savings by making deductible contributions before 30 June, 2024

Making voluntary deductible contributions (or concessional contributions) may provide a greater tax benefit if made before the Stage 3 tax cuts commence on 1 July this year.

This is because marginal tax rates for most income brackets will be lower in 2024/25, reducing the tax benefit that may be derived from making a personal deductible super contribution or contributing pre-tax salary into super.

The table below illustrates the additional tax savings available for clients at different income levels by making deductible contributions of $10,000 in this financial year.

These figures assume taxable income is unchanged in 2024/25 and the client doesn’t fall in to a lower tax bracket as a result of making the  deductible contributions. The figures also include the Medicare Levy Surcharge of 2%

As you can see from the table, it may be more tax effective for some individuals to make deductible contribution in the current financial year rather than after Stage 3 tax cuts are in affect. Furthermore some individuals will  have the ability to make catch up contributions which could enhance their overall tax savings this year. See our article “Don’t miss out on carry-forward deductible superannuation contributions” for more information on how catch up contributions can be made.

If you have questions or need guidance, feel free to contact us.