Wage growth sparks increase in superannuation contribution limits

BY DANIEL WALSH AND LEIGH DELEDIO FROM UFINANCIAL

Thanks to a surge in wages, workers are set to pump more money into their superannuation, with both pre-tax and post-tax contribution limits increasing starting July 1.

The pre-tax limit rises by $2,500, and the post-tax limit by $10,000 annually.

Experts predict that mortgage-free individuals, pre-retirees, and small business owners will capitalise on this opportunity to boost their super savings.

Additionally, the concessional contribution limit will surge from $27,500 to $30,000, while the non-concessional cap leaps from $110,000 to $120,000.

This adjustment was triggered by a 4.5 per cent increase in average weekly ordinary time earnings (AWOTE) reported by the Australian Bureau of Statistics, necessitating just a 0.7 per cent rise.

Concessional contributions include mandatory employer payments (currently at 11 per cent annually), salary sacrifices, and tax-deductible contributions.

Individuals can make up to five years’ worth of concessional catch-up contributions in a single year.

Many opt for after-tax contributions due to the advantageous tax treatment, with earnings taxed at only 15 per cent, compared to marginal tax rates that can reach 47 per cent including the Medicare levy.

Moreover, individuals can front-load their non-concessional contributions by bringing forward the equivalent of one or two years’ worth of their future annual cap, potentially contributing up to $360,000 from July 1.