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Super Contributions / SGC Changes in 2024 – Detailed Analysis and Tax Calculations

My SMSF Contributions article May 2024

Superannuation Changes in 2024: Detailed Analysis and Tax Calculations

As the landscape of superannuation continues to evolve, Self-Managed Super Fund (SMSF) members must stay informed about the latest changes and strategies to maximize their retirement savings. The year 2024 brings significant updates to the superannuation framework, including an increase in the concessional contribution cap and adjustments to the superannuation guarantee contribution (SGC) rate, among other changes. This article provides detailed insights into these updates, offering precise figures to help SMSF members plan effectively.

Increase in the Concessional Contribution Cap

Starting from 1 July 2024, the concessional contribution cap will see a substantial increase. Concessional contributions, which are made into your super fund before tax, will have a higher cap of $30,000, up from the previous $27,500. This adjustment allows SMSF members to contribute more pre-tax income into their super at a concessional tax rate of 15%, thereby offering an opportunity to boost retirement savings while potentially lowering taxable income.

The Superannuation Guarantee Contribution (SGC) Rate Increase

In addition to the increase in the concessional contribution cap, SMSF members should also note the rise in the Superannuation Guarantee Contribution rate. The SGC rate is set to increase to 11.5% by 1 July 2024, up from 10.5%. This gradual increase in the SGC rate ensures that employees will receive higher compulsory contributions from their employers, further enhancing their ability to accumulate superannuation savings.

Example Calculation: John’s Concessional Contributions

  • John’s Income and Contributions:
    • Annual income: $150,000
    • Concessional contribution cap: $30,000
    • SGC rate: 11%    (2023/24 financial year)
    • Employer contribution: 11% of $150,000 = $16,500
    • Available personal contribution: $30,000 – $16,500 = $13,500
    • Concessional tax rate: 15%
  • Tax Calculation:
    Contribution Type Total Contributions Tax Rate Tax Payable
    Employer Contribution $16,500 15% $2,475
    Personal Contribution $13,500 15% ( Salary Sacrifice) $2,025
           
    Totals  $30,000   $4,500
  • John’s Tax Savings: By contributing $30,000 pre-tax ($16,500 from employer contributions and $13,500 as personal contributions), John reduces his taxable income to $136,500, benefiting from a concessional tax rate on his contributions and saving overall on his tax bill.

Key Changes Summary

Type Changes
Concessional Contribution Cap Cap increased to $30,000 from $27,500, effective 1 July 2024.
Superannuation Guarantee (SGC) Rate SGC rate to increase to 11.5% from 11%, effective 1 July 2024.
Contribution Splitting Allows splitting of up to 85% of concessional contributions with a spouse.
Contribution Catch-Up Options Carry forward unused concessional cap amounts for up to five years (balance < $500,000).

Understanding Contribution Splitting and Its Benefits

Contribution splitting allows SMSF members to split up to 85% of their concessional contributions with their spouse. This strategy can be particularly advantageous for optimizing the super balance between partners, especially in cases where one spouse has a significantly lower super balance or is older, potentially allowing for earlier access to super benefits under the current preservation age rules.

Leveraging Contribution Catch-Up Options

The contribution catch-up option remains a powerful tool for SMSF members who have not maximized their concessional contributions in previous years. Individuals can carry forward unused concessional cap amounts for up to five years, provided their total super balance is less than $500,000. With the cap increase to $30,000 from 1 July 2024, members have a greater opportunity to catch up on their contributions, especially beneficial for those with fluctuating income or those nearing retirement looking to boost their super savings.

Non-Concessional Contributions

Non-concessional contributions are made into an SMSF using after-tax income or assets. These contributions do not offer immediate tax benefits but can significantly boost retirement savings.

Example Calculation: 2023/24 Financial Year

  • John’s Share Portfolio:
    • Share portfolio sale proceeds: $210,000
    • Non-concessional contribution: $210,000
    • 50% CGT discount applies, taxed at 37% ( $210,000 – 50% = $105,000 x 37% tax rate )
    • Non Concessional Contribution Limit per person per Financial Year $110,000
  • Tax Calculation:  Non-Concessional Contribution – Share Portfolio Sell Down
    Contribution Type Amount Tax Rate Tax Payable
    Taxed Amount $105,000 37% $38,850
    Non-Concessional Contribution $210,000 0%  cap is $120,000 from 1 July 2024 $0
    Bring forward provisions $330,000 0% for a 3 year period $0
    Remaining NCC Cap $110,000  till 2025/26 financial year $0

John can contribute the entire $210,000 into his SMSF as a non-concessional contribution, significantly boosting his retirement savings without affecting his taxable income for the year. However, he must ensure that his total non-concessional contributions remain within the annual cap.

super contribution types to 2023FY my smsf

Other Key Changes to Superannuation in 2024

SMSF members should also be aware of other potential changes in the superannuation landscape, such as updates to the non-concessional contribution caps and possible adjustments to the transfer balance cap, which limits the amount that can be transferred into a tax-free retirement account. Staying informed on these changes is crucial for strategic superannuation planning.

Final Thoughts

The year 2024 marks a pivotal moment for SMSF members, with the increase in the concessional contribution cap and the SGC rate offering new avenues to enhance retirement savings. By employing strategies such as contribution splitting, utilizing catch-up contributions, and making strategic non-concessional contributions, SMSF members can make the most of these changes. As always, keeping abreast of the full spectrum of superannuation updates will ensure that SMSF members are well-equipped to optimize their contributions and secure a financially stable retirement.

ADDITIONAL INFORMATION:

Contact My SMSF – Contact Us | SMSF Setup, SMSF Accounting and SMSF Loans (mysmsfproperty.com.au)

ATO SMSF Contributions-  ATO Super Contributions 

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