Will the changes to superannuation threshold impact you? 

It’s important to note that key changes to the superannuation thresholds are coming into effect from the 1st of July 2024 (applicable to the 2024-25 financial year) and these changes might impact high-income earners such as medical practitioners both on a personal and business level. 

“These changes offer both opportunities and pitfalls for medical practitioners. It's crucial to review and adjust your superannuation strategy to stay aligned with the legislation and to ensure that it meets your financial obligations and your financial goals.  

Concessional Contribution Cap 

The concessional contribution cap will increase from $27,500 to $30,000. This cap encompasses contributions for which a tax deduction has been claimed (typically superannuation guarantee, salary sacrifice or voluntary contributions for which a tax deduction is claimed).  

Our senior financial adviser, Katharine Fasal notes that “medical practitioners should monitor their concessional contributions carefully. With the increased cap, practitioners have more room to maximise their super contributions, but they should still be cautious of potential excess contributions and associated charges.” 

It’s especially important to be aware in situations where there is a combination of employer superannuation guarantee (SG), salary sacrifice and/or personal voluntary contributions being added. The reason is that as your salary increases (in line with award rates or seniority), so does the amount being directed into superannuation; this then combines with the government-mandated increase in Superannuation Guarantee (which will become 11.5% from 1st July 2024) so reduces the overall capacity remaining below the cap to add additional amounts via either voluntary contributions (which a tax deduction is claimed) or salary sacrifice. 

If the concessional contribution cap is exceeded (and there isn’t the capacity to use up carry forward concessional contribution capacity from prior financial years) then penalties could apply. Excess contributions are taxed as assessable income at the member's marginal tax rate with a 15% tax offset. Fund members can choose to either treat excess amounts as non-concessional contributions or have them returned, with the latter option leading to 85% of the excess being sent to the ATO to cover liabilities. 

For business owners who are paying staff wages which incorporate superannuation guarantee (SG) payments, this amount must be adjusted to be in line with the updated percentage (going from 11% to 11.5%). 

Non-Concessional Contribution Cap 

The non-concessional contribution cap increased to $120,000, from $110,000. These contributions are generally made without claiming a tax deduction. The member's total superannuation balance must be less than $1,900,000 to make such contributions, and the member must be under 75 years of age.  

The bring-forward cap is now $360,000, up from $330,000, allowing superannuation fund members to make up to three years' worth of non-concessional contributions in one or two financial years. Eligibility is determined by the member’s total superannuation balance and age. 

Katharine Fasal suggests that it’s worth chatting to your financial adviser and considering if utilising the ‘bring forward’ rule to make larger non-concessional contributions could suit your situation, especially if you have a significant surplus income, have recently sold a business or are looking to boost your retirement savings.” 

It’s important to understand your capacity to add non-concessional contributions as exceeding this cap can result in a 47% tax liability, but your financial adviser can help guide you through this process and assist with potential solutions (apply the ‘bring forward’ rule or withdraw the excess to avoid this tax. 

Division 293 Tax Threshold 

The Division 293 tax threshold remains at $250,000. This tax affects members whose adjusted taxable income exceeds $250,000, with a 15% rate applied to the lesser of the amount of concessional contributions or the amount by which the income exceeds the threshold. 

“Higher-income earners, particularly specialists, should be mindful of Division 293 tax implications when planning their superannuation contributions”. 

Other Notes 

• No changes were made to the preservation age or the age-related pension drawdown rates. 

• The transfer balance cap remains unchanged at $1,900,000. This cap limits the amount of super that can be transferred to a tax-exempt retirement phase. 
• The capital gains tax (CGT) cap amount has increased to $1,780,000, from $1,705,000. This cap applies to contributions sourced from small business capital gains concessions. 
• The low-rate cap amount increased to $235,000 from $230,000. This cap affects the taxable components of super lump sums for members between preservation age and under 60.