What You Need to Know
The 2024–25 financial year brings updates to superannuation contribution caps, impacting how much individuals can contribute to their Self-Managed Super Funds (SMSFs). With increased limits, it’s important for SMSF members to understand these changes and maximize their retirement savings effectively.
Here’s a breakdown of the latest contribution caps, what they mean for your super strategy, and how to avoid potential tax penalties.
1. Concessional (Before-Tax) Contributions Cap
Concessional contributions are pre-tax contributions that attract a 15% tax within the fund. They include:
- Employer Superannuation Guarantee (SG) contributions
- Salary sacrifice contributions
- Personal contributions claimed as a tax deduction
FY2025 concessional cap: $30,000 per year (up from $27,500 in FY2024)
Carry-forward rule:
If your total super balance is below $500,000 as of June 30, 2024, you can carry forward unused concessional cap amounts from the past five years. This allows you to make larger concessional contributions in later years if you didn’t use the full cap previously.
- Any excess concessional contributions are added to your taxable income and taxed at your marginal rate, with a 15% tax offset.
2. Non-Concessional (After-Tax) Contributions Cap
Non-concessional contributions are voluntary after-tax contributions that do not attract additional tax within the fund. However, they cannot be claimed as a tax deduction.
FY2025 non-concessional cap: $120,000 per year (up from $110,000 in FY2024)
If your total super balance is below $1.9 million, you can use the bring-forward rule, which allows you to contribute up to $360,000 in a single year by bringing forward two future years’ worth of contributions.
- If your total super balance is $1.9 million or above, you cannot make non- concessional contributions for FY2025 without incurring a 47% excess contributions tax.
3. What Happens if You Exceed the Caps?
Exceeding concessional caps:
- The excess amount is taxed at your marginal tax rate, but you’ll receive a 15% tax offset.
Exceeding non-concessional caps:
- You may have to withdraw the excess amount or pay a 47% tax on the excess contributions.
4. How SMSF Members Can Make the Most of These Changes
Review your contributions strategy – With higher caps, you may want to contribute more and take advantage of tax benefits.
Use salary sacrifice effectively – If your employer allows it, salary sacrificing can help boost super and reduce taxable income.
Keep track of your total super balance – This determines whether you can use the bring-forward rule for non-concessional contributions.
Seek professional advice – An accountant or financial planner can help you optimize contributions while staying within limits.
Final Thoughts
The increase in superannuation contribution caps for FY2025 presents a valuable opportunity for SMSF members to grow their retirement savings tax-effectively. However, exceeding the caps could lead to unnecessary tax penalties, so careful planning is key.
By understanding the rules, using salary sacrifice, and monitoring your total balance, you can maximize your super while avoiding costly mistakes.
The information provided does not constitute financial product advice. Should you require further guidance or assistance with regards to the superannuation contributions, please contact Deepak Sachdev, Superannuation Services Manager on 02 4721 6000.
Super Need to Know – Coming July 1, 2025
Super Guarantee (SG)
From 1 July 2025, the super guarantee, that is – the percentage of your wage that your employer is required to pay into your super account, will increase from 11.5% to 12.0%.
Super on Gov Funded Parental Leave
The government-funded Paid Parental Leave (PPL) will begin on 1 July 2025. From 1 July 2026, payments will be made directly to individuals’ superannuation funds.
This policy is designed to reduce the impact of career breaks taken to care for young children on superannuation balances.
Super Tax Concessions
On 28 February 2023, the Australian Government announced from 1 July 2025 a 30% concessional tax rate will be applied to future earnings for superannuation balances above $3 million, instead of the current 15%. Learn more here.
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