Superannuation thresholds & tax rates

Ensuring you don’t over-contribute to your superannuation can save you from paying excessive tax. Understanding superannuation thresholds and tax rates for contributions, employment termination payments, super guarantee, and co-contributions is crucial for strategic tax minimisation and building a substantial retirement fund.

Today’s article covers the basics of superannuation tax rates and contribution caps to aid your retirement planning.

Superfund tax rates.

In Australia, complying superannuation funds benefit from tax concessions, with investment income typically taxed at a maximum rate of 15%, significantly lower than the income tax rate. This concessional tax rate encourages retirement savings via superannuation.

Different tax rates apply within a complying super fund for various income types and contributions:

• Concessional contributions: 15%
• Non-concessional contributions: 0%
• Fund earnings (interest, dividends, capital gains, etc.): 15%
• Capital gains on assets held for >12 months: 10%
• Benefits paid to members aged >60 years: 0%

Understanding contribution caps.

Knowing your super contribution caps is essential because exceeding them results in additional tax.

Concessional contributions cap.

Concessional (pre-tax) contributions include employer contributions (such as salary sacrifice) and personal contributions claimed as a tax deduction. The current concessional contributions caps are:

• 2023-24: $27,500
• 2024-25: $30,000

Exceeding the concessional contributions cap results in the excess being taxed at your marginal tax rate. However, unused concessional contribution amounts can be carried forward under certain conditions. If your super balance is under $500,000 as of June 30th of the previous financial year, you can take advantage of this carry-forward provision.

Non-concessional contributions cap.

Non-concessional (post-tax) contributions include personal contributions made with after-tax income. The current non-concessional contributions caps are:

• 2023-24: $110,000
• 2024-25: $120,000

Capital Gains Tax (CGT) cap.

The CGT cap allows contributions to superannuation from capital gains without counting them against the non-concessional contributions cap. This lifetime limit applies to specific contributions from the sale of certain small business assets. The current CGT cap amounts are:

• FY2023-24: $1,705,000
• FY2024-25: $1,780,000

Super guarantee.

Employers must make super contributions for employees at least quarterly at the following rates:

• FY2023-24: 11%
• FY2024-25: 11.5%

Important for employers: Ensure your accounting software is updated by July 1st to reflect the 0.5% increase for correct super payments.

Income thresholds for government co-contributions.

The government co-contribution scheme helps boost superannuation for low to middle-income earners by contributing 50c for every $1 contributed, up to a maximum amount.

Lower income threshold.

Below this level, contributing $1,000 of after-tax income to your super results in a maximum government co-contribution of $500.

• FY23-24: $43,445
• FY24-25: $45,400

Higher income threshold.

Above this level, no government co-contribution is available.

• FY23-24: $58,445
• FY24-25: $60,400

Between the thresholds.

If your income falls between these thresholds, the government co-contribution gradually decreases as income increases, reducing by 3.33 cents for each dollar over the lower income threshold until it ceases at the higher income threshold.

Plan your retirement with Ascent.

Don’t neglect your superannuation — it’s never too early to start planning your retirement. For professional help in building a comfortable nest egg, reach out to Ascent Accountants. Our tailored advice can help secure your financial future. Contact us today for more information and practical steps forward.