From 1 July 2023, the general transfer balance cap was indexed meaning many more retirees can again make non-concessional contributions this year.

Contributing to superannuation is now much more accessible for older retirees with available cash and investments that they want to transfer into the tax effective superannuation environment.

The changes

One change was the abolishment of the work test from 1 July 2022 which required an individual be working to make personal non-concessional (non-taxable) contributions until age 75. Note that for personal concessional (deductible) contributions, the work test rules still apply for those aged 67-75.

The introduction of the general Transfer Balance Cap (TBC) was one of the biggest changes in the July 2017 superannuation reform measures and it was initially set at $1.6 million. It is subject to indexation in line with inflation in $100,000 increments. The latest indexation occurred on 1 July 2023 when, due to the recent high levels of inflation in Australia, the TBC increased by $200,000 to $1.9 million.

  • The general TBC determines the amount that an individual can transfer from their superannuation savings into a pension account. It also correlates to the individual’s eligible Non-Concessional Contribution (NCC) cap based on the Total Superannuation Balance (TSB) at the previous 30 June. Put simply, you cannot make any further NCCs once your individual TSB is over the general TBC.

The non-concessional and concessional caps were not increased, as they are indexed against AWOTE instead, so in 2023/24 the concessional cap remains at $27,500 and the non-concessional cap is four times this, so remains at $110,000 (or potentially more as we explore in the next issue).

What are non-concessional contributions?

Non-concessional contributions (NCCs) are non-taxable contributions where no tax deduction is claimed. They include personal after-tax contributions, spouse contributions, the non-taxable amount of foreign super transfers and any excess concessional contributions that are not released. They are the large contributions that individuals usually make in the lead up to retirement as a final boost to their superannuation.

Individuals aged 74 on 1 July of the financial year can make a NCC on or before the day that is 28 days after the end of the month in which they turn 75.

Retirement income streams

It is important to distinguish that increasing the ability to make NCCs doesn’t necessarily mean an individual will be able to then transfer these funds into a pension account if they had previously commenced a retirement income stream.

While those yet to transfer their funds to pension phase can have the full benefit of the $1.9 million TBC, those who had previously started a retirement income stream using the full $1.7 million TBC will not be able to transfer additional amounts to pension, as they have already ‘used up’ their personal TBC.

But, for those who started a pension previously for less than the TBC, a proportional indexation approach is used to calculate an individual’s personal TBC. But that’s another kettle of fish and it’s best to seek advice on this matter.

Click here to read Part 2 of this series. 

Prue Cheeseman is a financial adviser of HLB Mann Judd Wealth Management (NSW) Pty Ltd (AFSL 526052) ABN 65 106 772 696
This article contains general advice which does not consider your particular circumstances. You should seek advice from HLB Mann Judd Wealth Management (NSW) who can consider if the strategies and products are right for you.