When will the super caps increase

Thanks to HockeyMonkey for the links and explanation to these figures and where to find them.

Concessional cap

The concessional contribution cap was reset in 2017-18 from $30,000 to $25,000 and is to be increased in increments of $2,500 in line with AWOTE (average earnings), not CPI (inflation).

Note that figures used for indexing are based on the quarter ending on 31 December just before the start of the relevant income or financial year.

Therefore, the figures at which it is expected to increase would be as follows:

CC Cap AWOTE
$27,500 27,500/25,000 x 1,533.40 = 1,686.74 Indexed in 2021/22
$30,000 30,000/25,000 x 1,533.40 = 1,840.08
$32,500 32,500/25,000 x 1,533.40 = 1,993.42

The $27,500 limit of 1,686.74 was passed at the end of 2020 and was indexed in the financial year 2021-22.

End of year AWOTE figures come out towards the end of February.

For the $30,000 limit of 1,840.08 to be passed for the 2024/25 financial year, since the 2023 mid-year AWOTE figure is 1838.10, it would require a half-year increase in average earnings of 1,840.08/1,838.10 = 0.11%, which is a rate of just 0.22% p.a.

For the $32,500 limit of 1,993.42 to be passed for the 2024/25 financial year, since the 2023 mid-year AWOTE figure is 1838.10, it would require a half-year increase in average earnings of 1,993.42/1,838.10 = 8.45%, which is a rate of 16.9% p.a.

Non-concessional cap

The non-concessional contribution cap is 4 times the concessional contribution cap, so it increases at the same time.

Transfer Balance Cap (TBC)

The TBC was most recently set in the same financial year as the concessional contribution cap, 2017-2018 at $1.6m, and is increased in increments of $100,000 in line with CPI (inflation), not AWOTE.

Therefore, the figures at which it is expected to increase would be as follows:

TBC CPI Req’d
$1.7m 1.7/1.6 x 110 = 116.875 Indexed 2021/22
$1.8m 1.8/1.6 x 110 = 123.75 Surpassed
$1.9m 1.9/1.6 x 110 = 130.625 Indexed 2023/24
$2.0m 2.0/1.6 x 110 = 137.5
$2.1m 2.1/1.6 x 110 = 144.375

The TBC was raised to $1.7m in 2021/22 after it surpassed 116.875 in the CPI figure at the end of 2020.

The TBC was raised to $1.9m in 2023/24 after it surpassed both 123.75 and 130.625 in the CPI figure at the end of 2022.

For the TBC to be raised to $2.0m in 2024/25, CPI would need to have reached 137.5 in the 2023 December quarter figure, which it failed to do as it reached 136.1.

For the TBC to be raised to $2.0m in 2025/26, CPI will need to reach 137.5 in the 2024 December quarter figure, which would require an increase of 137.5/136.1 = 1.03% for the year.

Why are these relevant?

These are useful for specific strategies.

For instance, under the bring-forward rule, once the rule is triggered by contributing over the current year’s non-contribution cap, you can only contribute 3 times that amount over that and the following two years, regardless if the cap is increased during that time. If it is likely the non-concessional contribution cap will increase in the following year and you have more than 3 years’ worth of contributions, it may be better to contribute only a single year’s worth of non-concessional contributions and wait until the following year to contribute up to 3 years’ worth of contributions at a higher limit.

Another example is the TBC. Once you move your super into an account-based pension, you ‘set’ your own personal TBC, and only the remaining proportion of the the general TBC at that time continues to grow with inflation. If you expect the general TBC to increase, it may be worth considering whether to hold off moving to an account-based pension.