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Retirement & wealth
Superannuation
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2021
Ready Reckoner: Superannuation caps
From 1 July 2021, a range of superannuation caps and thresholds increased due to indexation. While the uplifts in the caps and thresholds are welcome, they will be accompanied by increased complexity as practitioners and taxpayers navigate the impact of the changes.
Download this handy guide for a breakdown of key contribution caps and thresholds you need to know for the 2020-21 and 2021-22 financial years.
Superannuation caps and thresholds
From 1 July 2021, a range of superannuation caps and thresholds increased due to indexation. While the uplifts in the caps and thresholds are welcome, they will be accompanied by increased complexity as practitioners and taxpayers navigate the impact of the changes.
Legislative references:
- Income Tax Assessment Act 1997 (ITAA 1997)
- Superannuation Guarantee Administration Act 1992 (SGAA)
- Superannuation Industry (Supervision) Regulations 1994 (SISR)
TABLE 1: Contributions caps and thresholds
Contributions caps and thresholds | 2020-21 | 2021-22 |
Concessional contributions (CC) cap1 | $25,000 | $27,500 |
General non-concessional contributions (NCC) cap2 | $100,000 | $110,000 |
General NCC cap under 3-year bring forward rule3 (see Table 2) | $300,000 | $330,000 |
Carry forward of unused concessional contributions — total superannuation balance (TSB) just before the start of the financial year4 | < $500,000 | < $500,000 |
CGT cap amount5 | $1,565,000 | $1,615,000 |
Division 293 tax threshold6 | $250,000 | $250,000 |
Government co-contribution7:
| $500 $39,837 $54,837 | $500 $41,112 $56,112 |
Low income superannuation tax offset7 where adjusted taxable income does not exceed $37,000 | Up to $500 | Up to $500 |
Work test exemption for those aged 67–74 (only in their first year of retirement) — based on TSB of individual at the end of the previous financial year8 | $300,000 | $300,000 |
TABLE 2: Bring forward rule (non-concessional contributions)
Total superannuation balance on 30 June 2020 | NCC cap for 2020–21 (first year) | Maximum bring forward period |
Less than $1.4 million | $300,000 | 3 years |
$1.4 million to less than $1.5 million | $200,000 | 2 years |
$1.5 million to less than $1.6 million | $100,000 | No bring forward period — general NCC cap applies |
$1.6 million or more | Nil | Not applicable |
Total superannuation balance on 30 June 2020 | NCC cap for 2021–22 (first year) | Maximum bring forward period |
|---|---|---|
Less than $1.48 million | $330,000 | 3 years |
$1.48 million to less than $1.59 million | $220,000 | 2 years |
$1.59 million to less than $1.7 million | $110,00 | No bring forward period — general NCC cap applies |
$1.7 million or more | Nil | Not applicable |
Points to note — bring forward rule
- An individual will trigger the bring forward rule for a financial year (the first year) if:9
- their non-concessional contributions for the first year exceed the general NCC cap;
- their TSB immediately before the start of the first year does not exceed the general transfer balance cap (TBC);
- they are under 67 years at any time in the first year (see Note 2 below);
- they have not already triggered the bring forward rule in either one of the previous two financial years before the first year; and
- the difference (the first year gap space) between the general TBC for the first year and their TSB immediately before the start of the first year exceeds the general NCC cap for the first year.
- The Treasury Laws Amendment (More Flexible Superannuation) Act 2021 extends the bring forward rule by enabling individuals aged 65 and 66 to make up to three years of NCC under the bring forward rule. The measure applies from 1 July 2020. Prior to 1 July 2020, the bring forward rule was available only to those individuals aged under 65 years at any time in a financial year.
- The bring forward rule is subject to the individual’s total superannuation balance on 30 June of the previous financial year. If an individual is aged 67 years or older on 1 July of the financial year, they cannot access the bring forward rule.
- Once the bring forward arrangement is triggered in a year, any change to the NCC cap for the bring forward period does not apply. The bring forward cap amount is set based on the cap in the first year of the bring forward period. While the NCC cap in the second and third year of a bring forward period started in 2019–20 or 2020–21 will change to $110,000 due to indexation, that individual’s NCC cap will still be $300,000 ($100,000 × 3 years) and does not increase to:
- $310,000 ($100,000 + $100,000 + $110,000); or
- $320,000 ($100,000 + $110,000 + $110,000)
TABLE 4: Benefit payments
Benefit payments | 2020-21 | 2021-22 |
|---|---|---|
Low rate cap amount12 | $215,000 | $225,000 |
Untaxed plan cap amount13 | $1,565,000 | $1,615,000 |
Disregarded small fund assets (prohibiting from using segregation rule for tax purposes) — where the TSB of the individual just before the start of the financial year exceeds:14 | $1,600,000 | $1,600,00 |
Benefit Payments | 2020-21 | 2021-22 |
Minimum annual drawdowns for a superannuation income stream (pension)15 Age of beneficiary in years | Standard drawdown rate
|
Legislated
|
Proposed16
|
Preservation age17 Date of birth:
|
Preservation age
|
Preservation age
|
Further guidance and information
Further guidance and information is available from the ATO website.
If you have any specific concerns that have not been outlined above, please get in touch.
Footnotes
1 Section 291-20(2) of the ITAA 1997.
2 Section 292-85(2)(a). The general non-concessional contributions cap is set at four times the concessional contributions cap.
3 Section 292-85(3) of the ITAA 1997.
4 Section 291-20 of the ITAA 1997.
5 Section 292-105 of the ITAA 1997
6 Section 293-20 of the ITAA 1997.
7 See the Superannuation (Government Co-contribution for Low Income Earners) Act 2003.
8 Regulations 7.04(1A) of the SISR.
9 Section 292-85(3) of the ITAA 1997.
10 Section 394-35(3) of the ITAA 1997.
11 Section 303-4(1) of the ITAA 1997. The defined benefit income cap is set by dividing the general transfer balance cap by 16.
12 Section 307-345 of the ITAA 1997. The low rate cap amount is the limit set on the amount of taxable components (taxed and untaxed elements) of a superannuation lump sum payment that can receive a lower (or nil) rate of tax. It applies to members that have reached their preservation age but are aged less than 60 years. It is a lifetime cap which is reduced by any amount previously applied to the low rate threshold.
13 Section 307-350 of the ITAA 1997.
14 Section 295-387 of the ITAA 1997.
15 Schedule 7 of the SISR. The minimum drawdown for account-based pensions was halved for the 2019–20 and 2020–21 financial years by Schedule 10 to the Coronavirus Economic Response Package Omnibus Act 2020 (enacted on 24 March 2020 as Act No. 22 of 2020).
16 As part of the response to the COVID-19 pandemic, the Government responded immediately and reduced the superannuation minimum drawdown rates by 50% for the 2019–20 and 2020–21 financial years, ending on 30 June 2021 (the changes were made by Schedule 10 to the Coronavirus Economic Response Package Omnibus Act 2020 which was enacted on 24 March 2020 as Act No. 22 of 2020). On 29 May 2021, the Government announced that the temporary reduction in superannuation account-based pension minimum drawdown rates would be extended for a further year to 30 June 2022 (the 2021–22 financial year). At the time of writing, an amending bill has not yet been introduced into Parliament.
17 Regulation 6.01(1) of the SISR.
18 Legislated to increase to 10.5% on 1 July 2022; 11% on 1 July 2023; 11.5% on 1 July 2024; and 12% from 1 July 2025.
19 Section 15 and s 19(4) of the SGAA.
21 The Government announced on 11 May 2021 as part of the Federal Budget 2021–22 that it would remove the current $450 per month minimum income threshold, under which employees do not have to be paid the superannuation guarantee by their employer. This measure will commence at the start of the first financial year after the enabling legislation receives Royal Assent. The Government expects this to have occurred before 1 July 2022.
DISCLAIMER: The material and opinions in this article should not be used or treated as professional advice and readers should rely on their own enquiries in making any decisions concerning their own interests.
© 1996-2021 The Tax Institute (ABN 45 008 392 372 (PRV14016)). All rights reserved. The Tax Institute is a Recognised Tax Agent Association (RTAA) under the Tax Agent Services Regulations 2009.
22 July 2021
Tags
- Retirement & wealth
- Superannuation
- Contributions
- 2021