Not working? What about super contributions

In this article, we explore a few recent changes and updates that positively affect your superannuation contributions. It is especially useful if you’re no longer working or went through a period in the past five years when you took a hiatus from the grind for any reasons.

Since July 2018, individuals have been able to roll unused contribution limits into subsequent years. This means if you didn’t use up your annual concessional (deductible) contribution limit, you can carry it forward for up to five years.

For example, if you contributed $11,500 in concessional contributions in the 2019 financial year, you could roll over the unused $13,500 and add it to a future year’s contributions, as long as your total super balance is under $500,000 as of June 30 of the previous financial year.

The 2024 financial year is an important crossroad. Any unused contribution limits from the 2019 financial year will expire after June 30, 2024. If you haven’t utilised any of your concessional contribution limits in the past five years, you could potentially contribute and claim a deduction for up to $157,500 this year. This is especially beneficial if you’ve taken a career break, been overseas, or simply haven’t maximised your super contributions.

Since July 1, 2022, older Australians have more flexibility in making super contributions. Previously, you could only make concessional and non-concessional contributions up to age 67. Now, you can make non-concessional contributions up to age 75, regardless of your work status. This includes the option to bring forward non-concessional contributions, provided your total super balance is less than $1.9 million as of June 30 of the previous financial year.

Another shift, effective July 1, 2017, is the removal of the “10% test.” Before this change, only self-employed or substantially self-employed individuals could make personally deductible super contributions. Now, anyone with employer income can make these contributions, regardless of their employment status. This opens up tax-effective opportunities for many more people to boost their super.

While these changes offer more flexibility, it’s important to remember the caps on concessional contributions and the proposed soft limit on super of $3 million, which will impose an additional tax on super fund earnings starting in the 2025-26 financial year. It is also important to consider the restrictions on accessing your superannuation when planning your contributions.

The recent changes do open several opportunities. While these updates can enhance your retirement savings, understanding and maximising their benefits often require specialised knowledge. In any financial decision-making, whether personal or business-related, professional financial advice is highly recommended. As an experienced and qualified wealth management firm, the financial planning team at North Advisory helps you tailor your contributions to align with your personal financial goals and circumstances, ensuring that you make the most of the available opportunities while adhering to the relevant caps and limits. We also provide insights into the tax implications of your contributions, helping you optimise your tax position and potentially save significant amounts over time.

By engaging professional advice, you stay updated with legislative changes and their potential impact on your superannuation strategy. With proposed changes like the additional tax on super fund earnings over $3 million, it’s essential to have a plan that adapts to evolving regulations.

Superannuation is a long-term commitment, and making informed decisions now can significantly affect your financial security in retirement. Working with a professional ensures that your superannuation strategy is comprehensive, compliant, and aligned with your retirement goals.

North Advisory offers businesses affordable and flexible bookkeeping services, comprehensive business tax advisory, SMSF management services. Contact our team today for a no-obligation discussion.