With recent wage rises looking likely to continue into the December quarter, there is a strong chance the concessional contribution cap will jump to $30,000 from 1 July 2024, according to Colonial First State technical managers.
Colonial First State senior technical manager Tim Sanderson said it is very likely that the average weekly ordinary time earnings (AWOTE) figure for the December quarter will be high enough to see the contribution caps indexed for the 2024–25 financial year.
“Keep in mind that the concessional cap is indexed to AWOTE in increments of $2500. So if indexation each year doesn’t result in an increase of more than $2500 then it will stay at the current level. Otherwise, it will increase to the next $2500 threshold,” said Mr Sanderson in a recent FirstTech podcast.
“The critical number will be that December quarter AWOTE figure. We don’t know what that will be yet but we do know the June 2023 quarter number. AWOTE only needs to increase by around 0.07 per cent in the six months through to the December quarter for that concessional cap to increase to $30,000 from 1 July.”
Colonial First State head of technical services Craig Day said there has already been a lot of talk about wages starting to increase.
“For example, we saw the Productivity Commission increase the minimum wage for 2023-24 by over five per cent so assuming that all flows through to the December AWOTE figure, I think we are likely to see the concessional cap increase to $30,000 on 1 July,” said Mr Day.
“This will also have knock-on implications for the non-concessional cap as well.”
Mr Sanderson noted that while the non-concessional cap is not individually indexed, it is set at four times the concessional cap. So if the concessional cap goes up to $30,000, we will also see the standard non-concessional cap become $120,000 from 1 July 2024.
The general transfer balance cap on the other hand is less likely to see an increase for the next financial year, he said.
“The general transfer balance cap is indexed by CPI and we would need to see a quarterly increase in the inflation rate of 1.63 per cent approximately in the December quarter for the general transfer balance cap to increase from $1.9 million to $2 million on 1 July 2024,” he said.
“It’s still possible that it could increase but it’s less certain than the concessional cap increasing.”
