Following a temporary freeze on the indexation of the concessional contribution caps for two years by the former Labor Government, the 2014-15 financial year will finally see indexation increase of the current $25,000 cap up to $30,000. The Australian Taxation Office has recently updated their key rates and thresholds, confirming the indexation of the concessional contribution cap. It is important to note that the indexation will not apply to the temporary higher cap of $35,000 currently available to those individuals 59 and over as at 30 June 2013 (for 2013-14). However, this temporary higher cap will extend to individuals 49 and over at 30 June 2014 to apply for the 2014-15 financial year.
This indexation of the concessional contribution cap has some important additional flow-on effects to the non-concessional contribution cap (NCC), with this post-tax contribution cap being calculated as six times the concessional contribution cap. Therefore, from 1 July 2014 the non-concessional contribution cap will increase to $180,000. Those individuals under age 65 at 1 July 2014 will be eligible to utilise a higher bring-forward amount of $540,000(up from $450,000).
The concessional contribution caps since introduced on 1 July 2007 have changed constantly, mostly in a negative sense, having reduced substantially from $100,000 for individuals aged 50 and over back in 2007-08 and 2008-09. The table below shows the history of both the concessional and non-concessional contribution caps to better understand why many people have been frustrated with making contributions into superannuation.
This increase will bring a range of changes to various contribution strategies for self-managed super fund members, so it is important to start thinking about the planning of these increases in readiness for the 2014-15 financial year.