Contribution caps increasing on 1 July 2021

From 1 July, caps on non-concessional and concessional contributions, as well as the lifetime transfer cap, are increasing.

It’s important to be aware of these changes and how they could affect your retirement savings.

Concessional (before tax) contributions

Making additional concessional – or before tax – contributions can be a great way of boosting your super balance.

Concessional contributions have an annual cap. Currently the cap is $25,000 p.a., increasing to $27,500 p.a. from 1 July 2021. The super guarantee paid by your employer is included in this cap.

If you currently make additional concessional contributions, especially if you're considering increasing these, you should keep the new limit in mind to avoid tax penalties incurred if you exceed the cap.

If you have any questions about concessional contributions, the new cap or changing your contribution strategy, please call the Helpline on 1800 640 886.

Find out more about concessional contributions.

Non-concessional (after tax) contributions

The non-concessional contributions cap is currently set at $100,000 p.a. This will increase to $110,000 p.a. from 1 July.

If you’re self-employed, it’s especially important to familiarise yourself with this change.

Non-concessional contributions (up to the cap) don’t incur any additional tax since you’ve already paid income tax. However, if you currently make extra non-concessional contributions and are considering increasing these, you should keep the new limit in mind to avoid paying further tax.

If you have any questions about non-concessional contributions, the new cap or changing your contribution strategy, please call the Helpline on 1800 640 886.

Find out more about non-concessional contributions.

Lifetime transfer balance cap

This cap refers to the maximum balance you can transfer into a pension account when you retire. The general cap currently stands at $1.6 million but is increasing to $1.7 million from 1 July 2021.

Depending on their unique circumstances, each person will have their own personal transfer cap between $1.6 million and $1.7 million.

What will your cap be?

If you open a pension account for the first time on or after 1 July 2021, you will have a cap of $1.7 million.

Example 1

Graham starts his first pension account after the general transfer balance cap is indexed on 1 July 2021.

His personal transfer balance cap is $1.7 million.

If you already have a pension account and at any time between 1 July 2017 and 30 June 2021 its balance was $1.6 million or more, your cap will remain $1.6 million.

Example 2

Maryanne started a pension valued at $1.6 million on 1 December 2017. On 1 July 2018, she commuted $400,000.

The balance of her pension account just before indexation is $1.2 million. Maryanne isn't entitled to indexation and her personal transfer balance cap remains $1.6 million.

She will have cap space available to start a new retirement phase income stream to the value of $400,000.

If you already have a pension account but its balance has not been more than $1.6 million since 1 July 2017, then your cap will be proportionately increased based on your unused cap. Your personal transfer balance cap is available to view on ATO Online.

Example 3

Nina started a retirement phase income stream with a value of $1.2 million on 1 October 2018.

There are no lump sum withdrawals in Nina’s pension account. The highest ever balance in her pension account is $1.2 million.

Nina’s unused cap percentage is 25% of $1.6 million.

Nina’s personal transfer balance cap will by indexed by 25% of $100,000.

Nina’s personal transfer balance cap after indexation on 1 July 2021 is $1.625 million.

Changes to the cap could affect your retirement planning, including the timing.

If you’re considering retiring soon, Media Super’s Financial Planners can help determine whether it would be most beneficial to retire before or after 1 July 2021.