Super contribution caps climb as rising wages trigger indexation

Larger tax breaks loom for people with spare cash to pump extra into their super fund and boost their retirement nest egg.

Super fund members will soon be allowed bigger tax deductions for pumping money into their retirement savings after a rise in contribution caps was set in stone on Thursday.

For the first time in three years, the annual cap on tax-deductible concessional superannuation contributions will rise on July 1, from $27,500 to $30,000, after higher employment incomes triggered an indexation increase.

Concessional contributions include compulsory employer payments, salary sacrifice and other personal tax-deductible super contributions. Non-concessional contributions, made from after-tax money such as personal savings, will also rise from $110,000 to $120,000.

Aware Super’s general manager of advice, Peter Hogg, said the higher caps would give people “extra firepower to top up their retirement savings”.

Australians will soon be able to make bigger super top-ups before retiring. Picture: iStock

“While we know that many of our members are struggling with cost-of-living pressures at the moment, the increase in contribution caps will be heartening news for many older members who want to get their finances in the best possible health,” he said.

“Wages have been climbing at a relatively quick rate in recent years but contribution caps, because of the way they’re indexed, haven’t changed since 2021, so really we’re playing catch up.”

Concessional caps rise in $2500 increments and are indexed to average weekly ordinary time earnings (AWOTE), which the Australian Bureau of Statistics said on Thursday had risen 4.5 per cent in the year to November. Non-concessional caps are four times the concessional cap.

The SMSF Association said separate bring forward provisions meant someone could inject two future years of non-concessional caps in one financial year, for a total of $360,000 from July 1.

“These changes were expected and, alongside the stage three tax cuts applying from 1 July 2024, mean some may have additional disposable income to contribute more to super,” SMSF Association CEO Peter Burgess said.

Many people are also allowed catch-up contributions of previous year’s unused concessional caps, but Mr Hogg said super top-ups were not always the best option. “If you have a mortgage, for instance, you may be better served by making extra repayments,” he said.

Originally published as Super contribution caps climb as rising wages trigger indexation