As an employer, you must make super contributions in line with average ordinary time earnings (AOTE) to employees’ super fund, preparing them for post-retirement life.
Employers and independent workers can make concessional contributions on income that has yet to be taxed. The rate at which respective parties can lodge before-tax money is limited to what we call the concessional contributions cap.
In Q1 2024, the Australian Taxation Office (ATO) declared changes to the concessional super threshold, significantly changing how this process works. So, whether you’re an employer or an independent contributor, you’ll want to stick around for our rundown!
Has the Concessional Contribution Cap Increased?
The concessional contribution cap increase is the most significant change that came from the ATO’s announcement. For the income year 2024–2025, the cap becomes $30,000 annually. Here’s how the yearly cap compares to recent years:
- Income year 2022–23: $27,500
- Income year 2023–24: $27,500
- Income year 2024–25: $30,000
The new threshold comes into play on 1st July 2024, meaning any contributions made until 30th June remain capped at $27,500. Eligible concessional contributions include those from:
- Employers: Ordinary super at the 11% rate, contributions from a super guarantee charge, and salary sacrifice initiatives.
- Personal: Super contributed as a self-employed person, freelancer, or sole trader.
What Do These Changes Mean for Us?
Surpassing the cap is what we call excess concessional contributions or ECC. These funds are considered assessable and become taxed at your marginal rate. This is the rate at which the ATO charged your recent income.
A 15% tax offset reduces the payable amount to acknowledge that your superannuation fund has already paid the contributions tax.
What Happens If You Exceed the Concessional Cap?
Surpassing the cap is what we call excess concessional contributions, or ECC. These funds are considered assessable and become taxed at your marginal rate. This is the rate at which the ATO charged on your recent income.
The payable amount is then reduced by a 15% tax offset to acknowledge that your superannuation fund has already paid the contributions tax.
What Happens to Non-Concessional Super?
Non-concessional super payments are post-tax funds lodged into superannuation funds. As of 1st July 2024, the ATO will cap these contributions at $120,000 annually. Let’s see how non-concessional super has changed over recent years:
- Income year 2022–23: $110,000
- Income year 2023–24: $110,000
- Income year 2024–25: $120,000
It’s the biggest rise we’ve seen since the jump between $150,000 in 2013–14 to $180,000 in 2014–15.
Need a Hand Navigating Super Contributions?
Our team of chartered accountants can confidently track and plan concessional and non-concessional contributions to ensure you comply with updated caps and mitigate unexpected taxes.
Alongside super, we’ll handle all things bookkeeping, strategising, and forecasting. Contact us to get the best support for your firm today!
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