For professionals, executives, and business owners with surplus cash, it’s important to consider productive ways to enhance personal wealth, such as paying down debt, investing, or contributing to superannuation.
From 1 July 2024, the non-concessional contributions cap is $120,000. This cap is now reviewed annually to align with average weekly ordinary time earnings. Exceeding this cap may result in additional tax liabilities. Additionally, the concessional (pre-tax) contributions cap has increased to $30,000 per year. For those earning $260,000 or more, the 11.5% employer guarantee contribution will often cover this. However, it’s possible to contribute more.
Salary Sacrifice or Personal Deductible Contributions
Salary sacrificing or making personal deductible contributions of surplus cash to super can also be beneficial. With the Employer Super Guarantee now at 11.5%, it’s crucial to monitor your concessional contributions to avoid exceeding the $30,000 cap, which could lead to tax implications. There are ways to manage this tax, but your Total Super Balance (TSB) as of 30 June of the previous financial year may also affect your contribution limits.
Non-concessional contributions
If you have extra cash, you can contribute up to $120,000 per year as non-concessional (after-tax) contributions. There are specific rules and considerations, but let’s start with the tax advantages. Superannuation earnings are taxed at 15%, significantly lower than the marginal tax rate for many high earners. The following table illustrates the tax impact on $10,000 of earnings across different tax structures:
| Circumstance | Tax Rate | Tax on $10,000 of Income | Income After Tax |
| High Income Earning Executive (or through a family trust) | 47%* | $4,700 | $5,300 |
| Company structure | 30% | $3,000 | $7,000 |
| Superannuation (Accumulation) | 15% | $1,500 | $8,500 |
| Spouse earning between $18,200 and $45,000 | 21%* | $2,100 | $7,900 |
| Spouse earning less than $18,200 | Nil | Nil | $10,000 |
| Superannuation (Pension) | Nil | Nil | $10,000 |
*Including the 2% Medicare Levy
You can also contribute up to $360,000 in a single year using the three-year bring forward rule, provided you meet certain eligibility criteria. Assuming you have not triggered the bring-forward rule in previous years:
- From 1 July 2024, if your TSB at 30 June of the previous financial year was less than $1.66 million, you can contribute $360,000 or three times the annual non-concessional contributions cap. For example, in the 2024–25 financial year, if your TSB at 30 June 2024 was less than $1.66 million, you are eligible to contribute $360,000.
- If your TSB at 30 June of the previous financial year was between $1.66 million and $1.78 million, you can contribute twice the annual cap, which is $240,000.
- If your TSB at 30 June of the previous financial year was $1.78 million or above, you cannot bring forward any amount, but you can make a current year contribution of up to $120,000.
- Finally, if your TSB at 30 June of the previous financial year was $1.9 million or more you are ineligible to make non-concessional contributions.
These limits are based on the non-concessional contributions cap being $120,000 from 1 July 2024 and the general transfer balance cap being $1.9 million.
Downsizer Contributions
The Downsizer rule allows Australians to sell their family home and contribute up to $300,000 (or $600,000 per couple) to their superannuation. This is especially attractive as it does not count towards contribution caps or the fund’s TSB. The eligibility age is 55 years or over, benefiting those in pre-retirement planning. However, downsizer contributions count towards your transfer balance cap, so seeking advice from your financial advisor is recommended when using the downsizer contribution rule.
Compounding Interest and Access
One of the main advantages of contributing to super is the effect of compounding interest. While market volatility can affect returns, historical data shows that super balances grow significantly over time. However, contributing to super means that you won’t be able to access your money until you reach your preservation age. For those born after July 1, 1964, this means you must be 60 before you can access your funds, and at 65, or upon retirement after 60, you can access all your super.
Balancing Super Contributions with Other Financial Goals
There are reasons you might choose to use surplus cash elsewhere, such as paying down personal debt or investing in income-producing assets. For business owners, a well-considered financial plan that includes regular salary and superannuation contributions is essential. Surplus cash can create personal wealth through business profits, offering tax efficiencies and financial benefits. Appropriate wealth strategies should include accumulating assets and creating income streams now that will provide financial freedom in retirement.
Next Steps – Maximise Your Wealth with Qualified Advice
When you have surplus cash, you have several options. Whether you choose to make non-concessional contributions to your superannuation or use the funds in another way, maximising your personal wealth opportunities and navigating the rules typically requires qualified advice.
At Moiler Wealth, I provide qualified advice for boosting superannuation and retirement savings and establishing passive income streams for funding your lifestyle beyond work. I apply a 7-step Early Retirement Framework, which provides a methodology for using wealth opportunities for retiring early or at a time that’s right for you.
This approach is linked to my personal mantra that suggests if you can afford to work less, you probably should and make financial decisions that will allow you to spend more time doing what you want to do with those you love. Ultimately, it’s about financial planning to ‘live life, your way’.
If you’d like to know more, please contact me.
Moiler Wealth helps high net wealth individuals and family groups, professionals, business owners and pre-retirees to live life, your way!
Learn more about Adam here.
This document contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.
