Good news for superannuation members: the annual cap on non-concessional contributions (NCCs) has increased for the 2024–25 financial year. This change opens up new opportunities for those looking to maximise their retirement savings. However, it’s important to understand how this affects the three-year “bring-forward” arrangement and be aware of a potential trap related to the updated thresholds.

Understanding Non-Concessional Contributions

NCCs are personal after-tax contributions to your superannuation, separate from concessional contributions like employer contributions, salary sacrifice contributions, or deductible personal contributions.

Increased Caps

Starting 1 July 2024, the annual NCC cap rises from $110,000 to $120,000 due to indexation. This adjustment means the maximum amount you can contribute under a “bring-forward” arrangement has also increased. The “bring-forward” arrangement lets eligible members contribute up to three years’ worth of NCCs in a shorter period. The new maximum amount is $360,000 (3 × $120,000), up from the previous $330,000. This means you can contribute up to $360,000 in one go or in multiple contributions, provided the total over three financial years does not exceed $360,000. This could be beneficial if you receive a large inheritance, a bonus, or proceeds from selling an investment.

Eligibility for Bring-Forward Arrangements

To qualify for a bring-forward arrangement:

1. Age Requirement: You must be under 75 at some point during the financial year when you start the arrangement. If you plan to activate it in the financial year you turn 75, consult your advisor, as additional rules may apply.
2. Total Superannuation Balance (TSB): Your TSB as of 30 June of the previous financial year is crucial:
   • If your TSB was less than $1.66 million as of 30 June 2024, you can commence a maximum $360,000 three-year bring-forward arrangement for 2024–25.
   • If your TSB was between $1.66 million and $1.78 million, you can start a $240,000 two-year bring-forward arrangement.
   • If your TSB was $1.78 million or more, you are not eligible for a bring-forward arrangement.

For members with a TSB between $1.78 million and $1.9 million, you may make a regular NCC of $120,000 this year. If your TSB was $1.9 million or more, any NCCs would be treated as excess contributions.

Watch Out for the Trap

Note that the TSB thresholds have decreased compared to the 2023–24 financial year. Last year’s thresholds were slightly higher ($1.68 million and $1.79 million). This reduction means that while the NCC cap and the maximum bring-forward cap have increased, the eligibility limits for bring-forward arrangements have decreased. Ensure you refer to current information to avoid any missteps based on outdated thresholds.

Review Your Contributions Strategy

The new caps offer expanded opportunities for boosting your retirement savings, but it’s crucial to navigate these changes correctly to avoid excess contributions issues. Contact our office today to discuss how these changes impact your retirement savings plan and to optimise your contributions strategy.