Low wage growth freezes 2018-19 contributions caps
Superannuation | 17/04/2018 |
2 min read
If you are planning to give your super a kick-along next financial year, you won’t be getting any additional help from increased super contributions caps. However, the income threshold for lower wage earners benefitting from the government co-contribution will increase.
The cap for employer contributions from your pre-tax earnings (concessional) will remain unchanged in 2018-19 at $25,000*, while the non-concessional cap for contributions made out of your after-tax money will be $100,000.
Under legislation, the concessional cap can only increase in $2,500 increments, but low growth in average weekly ordinary time earnings (AWOTE) was insufficient to trigger an increase in the cap to $27,500. Thomson Reuters’ Weekly Tax Bulletin suggested that a continuation of this rate of growth in AWOTE would make the concessional cap unlikely to increase until 2023.
The outlook for the non-concessional cap would be similar, as it is locked at four times the concessional cap. Some flexibility is created by the ‘bring forward’ rule, which allows members to pay three financial years’ worth of contributions, or $300,000 in a single year.
You will be eligible for the maximum government co-contribution of $1,000 if your annual income is up to $37,697 in 2018-19 and a partial contribution for amounts between that amount and $52,697.
Mandatory SG contributions
The superannuation guarantee (SG) contributions paid by employers will remain at 9.5% of your earnings in 2018-19. For high income earners, an employer is not required to pay 9.5% on ordinary time earnings (OTE) above what is termed the ‘maximum contribution base’, which rises to $54,030 per quarter ($216,120 pa) in 2018-19.
For those receiving super benefits from ‘taxed’ funds like Equip, the lump sum low rate cap and ‘ETP cap’ will increase to $205,000 from $200,000 for 2018-19. In the event of a genuine redundancy, the tax-free amount will increase in 2018-19 to $10,399 (base amount) plus $5,200 for each whole year of service.
The general transfer balance cap if you are setting up a superannuation pension will remain at $1.6 million. If you are entitled to a lifetime pension, the ‘defined benefit income cap’ will also be retained into the new financial year at $100,000 per annum.
* Under recent legislation, you can make additional contributions out of after-tax money up to $25,000 under the concessional cap out and claim a tax deduction agains your assessable income. Contributions tax of 15% apply to these contributions, or 30% may apply if you’re a high income earner.