Maximise Your Retirement Savings

2025 Contribution Cap Changes Explained

Changes to Contribution Caps for the 2025 Financial Year

As we prepare for the 2025 financial year, significant changes are underway in the domain of superannuation contribution caps. Superannuation, a cornerstone of retirement planning for millions of Australians, offers a tax-effective means of saving for the future, with contribution caps dictating the maximum allowable annual contributions to super funds while still enjoying tax benefits. The key adjustments to these caps for the upcoming financial year are as follows:

Understanding Superannuation Contribution Caps

Superannuation contribution caps establish the maximum amount individuals can contribute annually to their super funds while still benefiting from concessional tax treatment. These caps undergo periodic adjustments based on factors like inflation and economic conditions.

There are two primary types of superannuation contributions:

1. Concessional Contributions: These encompass employer contributions (e.g., employer super guarantee contributions and salary sacrifice contributions) and personal contributions claimed as tax deductions. Concessional contributions are taxed at a concessional rate of 15% within the super fund.
2. Non-Concessional Contributions: These are after-tax contributions made by individuals from their take-home pay or savings. Non-concessional contributions are not taxed within the super fund, as they have already been taxed at the individual’s marginal tax rate.

Changes in Contribution Caps for 2025

For the 2025 financial year, adjustments have been made to both concessional and non-concessional contribution caps:

1. Concessional Contribution Caps: The concessional contribution cap is set to increase from the previous financial year. Individuals will be able to contribute more money to their superannuation funds while enjoying concessional tax treatment. The new concessional contribution cap for the 2025 financial year will increase from $27,500 to $30,000.
2. Non-Concessional Contribution Caps: Similarly, the non-concessional contribution cap may also see adjustments for the 2025 financial year. Non-concessional contributions allow individuals to boost their retirement savings beyond the limits of concessional contributions. The new non-concessional contribution cap for the 2025 financial year will increase from $110,000 to $120,000.

Implications for Retirement Planning

These changes in superannuation contribution caps have significant implications for retirement planning strategies. Individuals should review their contribution plans with one of our advisers and adjust them accordingly to take advantage of the increased caps, going forward.

Maximizing contributions within the caps can help individuals bolster their retirement savings and ensure a more financially secure future. Seeking professional financial advice to tailor superannuation strategies to specific circumstances and retirement goals is advisable.

Also, given the proposed reductions in tax rates for the 2025 financial year, there is a potential to obtain a larger tax saving by making non-concessional contributions this financial year, rather than waiting until the new financial year.

Worked Example.

The following provides a comparison of tax savings for someone earning $70,000 per annum and the positive tax impact of making an additional $10,000 NCC to super as a Personal Deductible contribution:

As you can see, the after tax benefit for making this type of contribution is approximately $1,750 as per the table below.

Conclusion

As the 2025 financial year approaches, please ask our financial advisers about the new superannuation contribution limits to optimize your retirement savings strategies. Understanding the adjustments to concessional and non-concessional caps is crucial for making informed decisions about super contributions and ensuring alignment with your retirement objectives. By staying informed and proactive, our clients can leverage the tax benefits of superannuation to secure a comfortable and financially stable retirement.

Warning: All information in this article is general and not personalised.

As you can see, the after tax benefit for making this type of contribution is approximately $1,750 as per the table below.

Conclusion

As the 2025 financial year approaches, please ask our financial advisers about the new superannuation contribution limits to optimize your retirement savings strategies. Understanding the adjustments to concessional and non-concessional caps is crucial for making informed decisions about super contributions and ensuring alignment with your retirement objectives. By staying informed and proactive, our clients can leverage the tax benefits of superannuation to secure a comfortable and financially stable retirement.

Warning: All information in this article is general and not personalised.

A Deeper Dive into Super Contributions

What exactly is a contribution?

A contribution refers to anything of value that increases the capital of a superannuation fund. It can be made by various parties, including yourself as the owner of the superannuation, the government, or a third party such as your employer. For instance, if you are an employee, your employer is likely already making contributions to your superannuation account on your behalf; which from 1 July 2023 has increased to 11% of your base wage.

Why should I contribute?

Making voluntary contributions not only helps to boost your retirement savings but also allows you to capitalize on valuable tax benefits. By contributing to your superannuation, you can save on taxes, as super contributions are taxed at a maximum rate of 15%. These tax savings, when compounded over time, can significantly enhance your retirement planning strategy.

Who is eligible to contribute?

You can make voluntary contributions to your superannuation fund until the age of 75, subject to eligibility criteria. In early 2022, legislation removed the “work test” requirement for voluntary contributions for individuals under the age of 67. However, for members aged between 67 and 75 who wish to claim a tax deduction for their personal contribution, the work test is still required.

When should contributions be made?

The timing of the contribution is important when determining which financial year the contribution will be counted towards the relevant cap, and which financial year any tax deduction will be claimed. Furthermore, whether you make contributions pre-tax or post-tax can affect your overall retirement planning strategy. Considering these factors and seeking professional advice can help you optimize your superannuation contributions.

Are there any risks involved?

It’s important to be aware that if your capital is invested, there is potential exposure to general investment risks, such as capital fluctuations and market volatility. Moreover, increasing your superannuation contributions means that the funds are locked away until you become eligible to access them.

There are many factors that must be considered when seeking to make a superannuation contribution. It is highly recommended to consult with your financial adviser to determine your eligibility, understand the relevant contribution caps, decide on the timing of contributions, and develop a customized retirement planning strategy. Feel free to contact one of your valuable advisers here at Crest to discuss the above and how it relates to you.

2022-23 Federal Budget

Despite a backdrop of the ongoing Covid 19 pandemic, the war in Europe, and a looming Australian federal election, the 2022-23 Federal Budget held few big surprises.  Most of the announcements related to tax relief and providing a post-pandemic economic recovery via stimulus payments.

It is important to remember that these are yet to be legislated, although we expect most of them to be accepted by the parliament. Please contact us if you have any questions or would like to know how any of these announcements may impact your personal situation.

The following provides a basic summary of some of the announcements made:

Superannuation

Temporarily extending the minimum pension drawdown relief
Proposed effective date: 1 July 2022

The temporary reduction to the minimum income drawdown requirement for superannuation pensions will be further extended until 30 June 2023. This will allow people to minimise the need to sell down assets given ongoing market volatility. It applies to account-based, transition to retirement, and term-allocated superannuation pensions.

Tax

Temporarily cutting fuel excise
Proposed effective date: 30 March 2022

Fuel excise will temporarily be cut by half, or 22.1 cents per litre, to save families an estimated $30 a week.

Increasing the Low and Middle-Income Tax Offset (LMITO)
Proposed effective date: 1 July 2021

The LMITO will be increased to up to $1,500 for the 2021-22 financial year. All eligible LMITO recipients will benefit from the full $420 increase, referred to as the Cost of Living Tax Offset.  The benefit is based on your taxable income as follows:

• Below $37,000 will be $675 (currently $255).
• Between $37,000 and $48,000, the offset will increase at the rate of 7.5 cents per $1 above $37,000 to a maximum of $1,500 (currently $1,080).
• Between $48,000 and $90,000 are eligible for the maximum LMITO benefit of $1,500 (currently $1,080).
• Between $90,000 and $126,000 the offset phases out at a rate of 3 cents per $1.
• Above $126,000 it is not available

Increasing the Medicare levy low-income thresholds
Proposed effective date: 1 July 2021

Low-income taxpayers will generally continue to be exempt from paying the Medicare levy. The threshold for:

• Singles will be increased to $23,365
• Families will be increased to $39,402
• Single seniors and pensioners will be increased to $36,925
• Families (seniors and pensioners) will be increased to $51,401.

Social security & Aged Care

Introducing a one-off cost of living payment
Proposed effective date: 28 April 2022 onwards

A one-off tax-free payment of $250 to Australians who receive qualifying social security payments or hold eligible concession cards, including:

• Age Pension
• Disability Support Pension
• Carer Payment
• Carer Allowance Jobseeker Payment
• Pensioner Concession Cardholders
• Commonwealth Seniors Health Card holders.

Enhancing the Paid Parental Leave scheme
Proposed effective date: 1 July 2023

The Government plans to create a single scheme of up to 20 weeks, fully flexible and shareable for working parents within two years of their child’s birth or adoption. Single parents will also benefit from the extended 20-week entitlement. The income test will also be broadened. Parents who don’t meet the individual income threshold (currently $151,350) can still qualify for payment if they meet a family income threshold of $350,000 a year.

Lowering the Pharmaceutical Benefits Scheme (PBS) threshold
Effective date: 1 July 2022

The Government will reduce the PBS safety net thresholds to support people who have a high demand for prescription medicines due to their health needs. This means approximately 12 fewer scripts for concessional patients and 2 fewer scripts for general patients a year.

Housing affordability

Expanding the Home Guarantee Scheme
Proposed effective date: 1 July 2022 or 1 October 2022 depending on the specific scheme

The Home Guarantee Scheme allows first home buyers to build or purchase a newly built home with a low deposit, replacing the need for commercial lenders’ mortgage insurance.

The Government is expanding the scheme to make available:

• 35,000 guarantees each year (up from the current 10,000) from 1 July 2022 under the First Home Guarantee, to support eligible first home buyers to build or purchase a newly built home with a deposit as low as 5%.
• 10,000 guarantees each year from 1 October 2022 to 30 June 2025 under a new Regional Home Guarantee, to support eligible homebuyers (including non-first home buyers and permanent residents), to purchase or construct a new home in regional areas with a deposit as low as 5%.
• 5,000 guarantees each year from 1 July 2022 to 30 June 2025 to expand the Family Home Guarantee. This program enables eligible single parents with dependants to enter or re-enter the housing market with a deposit as little as 2%.

7 Checks for your Super these Holidays

Christmas is known as a great time for giving and receiving gifts, while also spending time with friends and family. During the festive period, Superannuation isn’t the first thing that springs to mind. However, as far as gifts go, it’s one of the best you could give yourself at retirement. So take a moment these holidays to check up on your Superannuation retirement gift.

When it comes to protecting and growing your retirement gift, consider …

1. Salary Sacrifice

No one likes paying tax, and a great way to reduce your tax in 2020 while also boosting your retirement savings is to put some of your wage into super as a Salary Sacrifice. This is done by contributing the money prior to paying tax on it. The outcome is that more money is saved from each pay inside Super than if you were to take the money as an after tax wage. The catch is you normally can’t get the Salary Sacrifice amounts until you reach age 60 and retire.

There are also some important limits and caps on Salary Sacrifice that you need to be aware of before starting. However, if Salary Sacrifice is done properly the combined tax savings and compound growth can really boost your retirement gift.

2. Government Co-Contribution

The Government Co-Contribution is another great way to boost Super and is available if you earn between $1 and $53,000 pa. This scheme can see up to $500 automatically contributed to your Super by the government, if you put $1,000 of your own money into Super. The trick to obtaining this benefit is to ensure that you put the $1,000 in after tax (the opposite of Salary Sacrifice as described above) and check that you meet the other criteria related to the Co-Contribution.

3. Binding Death Nominations

Did you know, by law your Superannuation fund has to decide who gets your benefit in the event that you die. Therefore, it is really important that you inform your Superannuation fund how and to whom you want your hard earned Super funds to go. One option is putting a non-lapsing Binding Death Nomination on your fund (not all Superannuation funds offer these). Your nomination must also fit the Superannuation trustee rules and be made to a valid beneficiary. So these holidays, why not check who is currently nominated on your fund and make sure that this is in line with your overall estate plan. We always recommend that any changes to a Superannuation Death nomination be made in conjunction with an estate planning expert.

4. Lost Super

Lost Super normally ends up going to the Australian Tax Office (ATO) and currently it is estimated that the ATO have over $14 billion in Lost Super waiting to be claimed. Superannuation can get ‘lost’ for many reasons, including when you change employers, address or your name. However, based on a recent rule change, Super can now also be sent to the ATO if your fund has not received any contributions for over 16 months and has dipped below the $6,000 balance.

Any Lost Super should eventually show up on your MyGov account or can be searched for via the ATO website. It’s worth making sure these holidays that you don’t have any ‘Lost Super’.

5. Protecting yourself and your family via Super

Nothing disrupts retirement plans like an untimely illness, death or accident. Loss of a loved one, or even just lost earnings for a prolonged period can have a negative impact on your family and Superannuation retirement gift.

Therefore, the first step is to make sure you have the right amount and types of insurances in place to protect you, your loved ones and your retirement goals. Unfortunately, we find most people don’t take this important first step which can lead to a situation where either they won’t have enough insurance cover when it is needed or pay too much in premiums over the years. Both of these situations can hurt your retirement gift over the short and long term.

6. Super Consolidation

While Super Consolidation is often considered to be a good option to save fees and make managing your retirement gift easier, it is not always the best option for an individual. It is important to first know how many funds you have, what each one costs, how they are invested and what benefits each fund provides. Only once you have completed a full comparison of your current funds can you make an informed decision on which to consolidate. So as a first, why not locate each of your funds and make sure that they have your accurate contact and personal details on file.

7. Financial Advice

Conducting some simple checks on your Super over these holidays is a great place to start, however, this is just the beginning of the process. There are many aspects to be considered when it comes to Superannuation and we strongly recommend that you engage a professional financial planner to help guide and advise you on your path to retirement and beyond.

Why not make your 2020 New Years Resolution to engage a professional financial planner, so that you can build a Superannuation benefit worth unwrapping at retirement.

This article is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.

Five Things You Need to Know for 2020 Financial Year

To be better equipped in the new financial year, here are five ideas that could benefit your financial plans, specifically your super.

1. Insurance In Super

New laws effective 1st July 2019, could impact insurance held in your super. Now super funds are required to cancel insurance cover held in ‘inactive’ super accounts, unless the member has confirmed they would like to keep it.

Super accounts are deemed ‘inactive’ when no contributions or rollovers have been made within 16 months. To do so, members can make contributions or roll amounts from another super fund into their account.

Members affected by the change who want to retain their insurance, should consider acting before the cover in cancelled.

2. Catch-up Super Contributions

Super fund members who made concessional contributions of less than the annual cap of $25,000 in the 2018/19 financial year, may be able to contribute more than the cap amount in 2019/20 and subsequent years. Making ‘catch-up’ concessional contributions could appeal to people who have broken work patterns, can’t afford to contribute in a particular year or receive a windfall.

Concessional contributions include all employer contributions (super guarantee and salary sacrifice), personal contributions claimed as a tax deduction and certain other amounts.

3. Superannuation Work Test Exemption

Recent retirees with lower super balances have more time to make additional super contributions. From 1 July 2019, people aged 65 to 74 with a total super balance below $300,000 (as of 30 June of prior financial year) no longer need to meet the ‘work test’ in the 12 months after they retire. If eligible, this is a once in a lifetime exemption, however, additional voluntary super contributions can be made without having to meet the work test –defined as gainful employment for at least 40 hours in 30 consecutive days during the financial year.

4. Work Bonus Extension

Recently, significant changes have been made to the ‘Work Bonus’ that could benefit people eligible for the Age or Service Pension and are still working. Since 1 July 2019, the maximum income that can be earned from employment without impacting benefits increased from $250 to $300 per fortnight. This is also now available to people who are self-employed.

5. Deeming Rate Changes

‘Deeming rates’ are used to assess income from certain investments for various security benefits reduced on 1 July. Some may now receive higher payments like the Age Pension, Disability Support Pension or Carer Payment, if their entitlement is determined by the income test. Deeming rates that are lower could help some qualify for other income tested benefits such as the Commonwealth Seniors Health Card.

Need Help?

The Crest Financial Services team can assess whether any of these matters affect your circumstances and make suitable adjustments to your financial plans. If you would like to learn more about Superannuation, click here to get you started.

Are you a Superhero?

Unfortunately, the reality is that we don’t have to look very far to see the terrible emotional and financial impact that sickness and death can have on the lives of our friends, family and loved ones.

So it is important that when taking on any additional debt, such as buying a house or re-financing a home loan, that you conduct a ‘reality check’ to determine the potential risks and how best to protect against them.

A simple starting point is to ask yourself:

How long would my family be able to keep our home (i.e. keep making the monthly repayments):

• If I (or my partner) died tomorrow?
• If I had to stop work due to health issues or an accident?

If the answer means the house would have to be sold at some point, then an immediate analysis of your Life insurance requirements should be completed.

Personal insurances, such as Life insurance, Income Protection, Trauma and Total and Permanent Disability policies, normally form a key part of protecting your situation. These can be tailored to ensure that debts and cost of living expenses can continue to be met, no matter what life throws at you.

It is true that the above events may entitle you to some Work Cover, Centrelink Disability Support Pension or the ability to access part of your super. However, in our experience these benefits (on their own), are usually not enough to save the family home from being sold.

At Crest Financial Services, as part of our financial planning process, we assist clients to put in place appropriate personal insurances and advise on how to best structure these to minimise cost and impact on your daily cash flow.

Become a real superhero for your family, and get advice on how to best protect them.

Welcome to the new Financial Year!

Tax season is well and truly in full swing at Crest Accounting! With this in mind, it is time to organise those end of year records so that we can complete your 2018 Income Tax Return.

There have been some changes to legislation over the past 12 months that may impact you, and your ability to claim certain deductions. Here is a quick summary of some of the changes we think may be important to you:

Personal Super Contributions

For the year ended 30 June 2018 and onwards, the ability to claim a tax deduction for personal contributions you make to your super fund has been extended to everyone (as opposed to only those who were self-employed). There are still some limitations, including contribution caps and age restrictions, however the average person will now be able to contribute to super at their will, and claim a tax deduction for these amounts. As with anything, there is some paperwork to be completed in order to claim a deduction, but your financial adviser or accountant will be able to guide you with this. It is best to act as quickly as some events within your super fund may impose restrictions on how much you can claim. It would also be beneficial to have a chat with us as to whether this is something you should look at in the future.

Travel for Work

There have been some recent changes (for the better) in regards to the situations in which you can claim a tax deduction for travel related to your work. One noteworthy change is the introduction of the deductibility of “co-existing work locations travel”. In most situations this will eventuate where an employee is required to work in more than one location, and travel to the secondary location will now be deductible. Employees are still restricted to either the cents per kilometre method (up to 5,000km), or the log book method, and careful consideration needs to be given to whether these rules apply and if you are eligible.

Rental Property Changes

from 1 July 2017, some new restrictions have been placed on the deductibility of travel and depreciation expenses in relation to rental properties. Travel expenses in relation to residential rental properties are no longer deductible, regardless of when the property was acquired. In prior years a person has been able to claim expenses over the year for when they travelled to the property to inspect it, this is no longer the case. Additionally, any depreciating assets acquired (whether as part of a property or separately) after 9 May 2017 where the assets have been “previously used” (second hand or acquired with a property that was not new) are no longer able to have their depreciation claimed as a tax deduction. These rules can become quite complex when trying to separate assets into deductible and not, so it is best to speak to one of our accountants here at Crest to determine the best approach moving forward.

At Crest, our focus is to ensure your tax return remains compliant, whilst working hard to ensure the best tax position for you, your family and your business.

Call our office on (02) 4933 3466 to book an appointment today.