For those not familiar with super and the ways in which you can add money, it’s important to note that there are certain limits, depending on the type of contribution being made. The limits haven’t changed in some time, but with the recent release of the Average Weekly Ordinary Times Earnings (AWOTE) for December 2020, the caps are set to increase due to indexation from 1 July 2021.
There are three types of contribution that you can make to super:
Concessional – these are tax deductible contributions with a current annual limit of $25,000. This will increase to $27,500 pa from 1st July 2021. This limit includes any super guarantee contributions (from your employer), salary sacrifice or personal tax deductible contributions. These contributions attract 15% tax, but if your marginal tax rate is higher, then it can reduce your overall tax bill. It is also possible to contribute over and above the annual cap if caps haven’t been fully utilised in previous financial years.
Non-concessional – these are contributions where tax has already been paid; the limit is $100,000 pa for 2020 and will increase to $110,000 pa from 1 July 2021. These types of contributions are from bank accounts or investments where the tax has already been paid (i.e. savings in your bank account). As tax is already paid, no tax is applied when the money goes into your super fund. If you have a large amount of money and depending on your age, you may be able to contribute up to $330,000 in one year from 1 July; that is, three times the annual limit. But this precludes you from putting any more in the following two years (known as the “bring forward rule”).
The non-concessional cap threshold has also increased from $1.6 million to $1.7 million. For example, from 1 July 2021, a person’s non-concessional cap will be nil if their total super balance on 30 June 2021 is $1.7 million or more.
Downsizer – This is if you are over 65 and sell a property you’ve owned for at least 10 years, part of (or all of) which you were living in it. It is separate to the other two contribution types and has a limit of $300,000 per homeowner.
If you wish to discuss any of these options, please get in touch with your Goldsborough adviser to look at your individual circumstances.
This is intended to be general advice only. Goldsborough Financial Services has not taken into account the objectives, financial circumstances or investment needs of any particular person. For specific advice on your situation please contact your Goldsborough Financial Planner.