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New Increased Super Contribution Caps

Shane Lee • Apr 14, 2024

As the end of financial year gets closer, some investors are thinking about the most effective ways to boost their super balance, particularly with an increase in the caps on contributions from 1 July.

The concessional contributions cap, which is the maximum in before-tax contributions you can add to your super each year without paying extra tax, is increasing to $30,000 from $27,500 in the new financial year.i


The cap increases in line with average weekly ordinary earnings (AWOTE).


It is also useful to be aware of payment and reporting timelines. For example, your employer can make super guarantee contributions up until 28 July for the final quarter of the financial year and salary sacrifice contributions up until 30 June.


Any amounts showing on the ATO website for your account are based on when your fund reports to the ATO.


Carry forward unused amounts


If you haven’t made extra contributions in past years, you may have unused concessional cap amounts.


These can be carried forward, allowing you to contribute more as long as your super balance is less than $500,000 at 30 June of the previous financial year.


You can carry forward up to five years of concessional contributions cap amounts.


Getting close to exceeding the cap?


If you’re worried about going over the cap, you may wish to stop any further voluntary contributions based on an assessment of the extra tax you will pay.

For those with two or more employers, you may opt out of receiving the super guarantee from one of the employers.


Meanwhile, if special circumstances have caused you to exceed your cap, it’s possible to apply to the ATO for some or all of the contributions to be disregarded or allocated to the next financial year.


But, if all else fails and you have exceeded the cap, the excess contributions will be included in your assessable income and taxed at your marginal rate less a 15 per cent tax offset. The good news is that you can withdraw up to 85 per cent of the excess contributions from your super fund to pay your tax bill. Any excess contributions left in the fund will be counted towards your non-concessional contributions cap.


Timing is everything


The upcoming Stage 3 tax cuts, which commence on 1 July 2024, may affect the value of your concessional contributions. For some, tax benefits may be greater if contributions are made before the tax cuts begin.


Please check with us about your circumstances to make sure you make the most effective move.


Non-concessional cap also increased


The non-concessional contributions cap is the maximum of after-tax contributions you can make to your super each year without paying extra tax.ii


The non-concessional cap is exactly four times the amount of the concessional cap so it increases from $110,000 to $120,000.


If you exceed the cap, you may be eligible to use the ‘bring forward rule’, which allows you to use caps from future years and possibly avoid paying extra tax. It means you can make contributions of up to two or three times the annual cap amount in the first year of the bring forward period. iii


If your total super balance is equal to or more than the general transfer balance cap ($1.9 million from 2023–24 and 2024-25) at the end of the previous financial year, your non-concessional contributions cap is zero for the current financial year.


We’d be happy to help with advice about how the changes in contribution caps might affect you and whether you are eligible for the bring forward rule.


i, ii Understanding concessional and non-concessional contributions | Australian Taxation Office (ato.gov.au)
iii Non-concessional contributions cap | Australian Taxation Office (ato.gov.au)


The information in this article does not take into account your objectives, needs and circumstances. We recommend that you obtain investment and taxation advice specific to your investment objectives, financial situation and particular needs before making any investment decision or acting on any of the information contained in this document. Subject to law, Capstone Financial Planning nor their directors, employees or authorised representatives gives any representation or warranty as to the reliability, accuracy or completeness of the information; or accepts any responsibility for any person acting, or refraining from acting, on the basis of the information contained in this document. Principal Wealth Management Pty Ltd trading as BMO Financial Solutions ABN 53 109 336 601 is a Corporate Authorised Representative (CAR 277821) of Capstone Financial Planning Pty Ltd ABN 24 093 733 969 Australian Financial Services Licence (AFSL) No. 223135.

Occupational Burnout in the Workforce

By Dave Adams • 28 Mar, 2024
We all know how hard it is to find good employees and also how important it is to hold onto our good team members. While some workforces shrink it can often be our good people that get loaded up in the workplace. Not kept in check this can leave to employees burring out. Burnout can be described as a severe state of physical and emotional exhaustion, and in the workplace, it can arise from prolonged job stress and inadequate support. It progresses through stages: exhaustion, cynicism, and reduced accomplishment. Ignoring burnout can lead to employees having decreased productivity, increased absenteeism, turnover, and mental health issues. Where we have good relationships with our team, we can begin to see the early signs before it becomes a problem. However, it can also present in different ways including absenteeism, performance, behaviour. The good news is that it can be prevented. Firstly, through good open communication and that includes listening. Secondly, we need to set our team members realistic goals and provide adequate resources and training. As managers you need to be role models of good behaviour and promote a fair but achievable work life balance. No one needs an employee that is not functioning at their best, treat and manage team members well and your business will only prosper from it.

Navigating FBT and Your Obligations

By Christine Town • 28 Mar, 2024
Businesses looking to attract and retain staff often provide employee benefits, on top of salary, as a way to sweeten the deal. Many of these benefits (but not all) can have potential tax consequences – known as fringe benefits tax (FBT) - so it is important to weigh up the effect on your business. FBT is separate to income tax and is calculated on the value of the benefit provided to the employee. Employers must work out the amount of FBT they owe each year and lodge a return. It is worth noting that the FBT year is not the same as the financial year. It runs from 1 April to 31 March. What to report Most fringe benefits must be reported to the ATO. Some examples of benefits include: the use of a company car outside of work; free parking; gym membership; payment of school fees; tickets or vouchers for concerts, meals or movies; and living accommodation. Some benefits do not need to be reported and do not incur FBT.i These include a number of benefits provided to employees working in remote areas, such as living assistance. Other fringe benefits that are exempt from tax include work-related items such as portable electronic devices, computer software, protective clothing and tools of trade. If the taxable value of an employee’s fringe benefits for the FBT year (1 April to 31 March) is less than $2,000, no reporting is required. In adding up the fringe benefits, the ATO says you will need to make sure you include the employee’s part of any benefits they share with other employees as well as the value of any benefits provided to the employee’s associates, such as their partner. Doing the numbers For each employee, you’ll need to calculate their ‘reportable fringe benefits amount’ (RFBA) by multiplying the total taxable value of the benefits provided by an ATO ‘gross-up rate’. The Type 1 gross-up rate is used where a GST credit entitlement is applicable to the benefit. The Type 2 gross-up rate is used where there is no GST credit entitlement applicable to the benefit. (For the FBT year ending 31 March 2023, the Type 1 rate is 2.0802 and the Type 2 rate is 1.8868.) This calculation grosses up the pre-tax income the employee would have had to earn to buy the benefits themselves. FBT and salary sacrifice Benefits provided to employees through salary sacrificing may also attract FBT. Under a salary sacrificing arrangement, an employee agrees to forgo part of their salary in return for benefits of a similar value, such as more super or a car. As a result, the employee pays less income tax and the employer pays FBT on the benefits provided. Extra super contributions made under a salary sacrificing arrangement are not subject to FBT and are treated differently. They are considered employer contributions and are taxed in the super fund. Claiming deductions Employers can claim income tax deductions for the FBT they are required to pay. You can also claim an income tax deduction and GST credits for the cost of providing the fringe benefits. The ATO provides some suggestions for reducing FBT liability. For example, employers do not incur an FBT liability if you give an employee a benefit they would have been able to claim as an income tax deduction if they had paid for it. Your FBT liability can also be reduced if the employee contributes towards the cost. Fringe benefits can be a valuable and strategic tool in your recruitment and retention toolbox. We can help you understand and comply with the reporting requirements and be clear about the impact of FBT on your business.  i Fringe benefits tax - a guide for employers | Legal database (ato.gov.au)
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