SMSF trustees and practitioners should be aware an anomaly related to indexation of the concessional contribution (CC) cap and increases in the superannuation guarantee (SG) rate will cause the maximum contribution base to fall this year, a technical specialist has noted.
Smarter SMSF education and technical manager Tim Miller said the decrease would take place because while the SG rate had increased, the CC cap had remained static for this year.
“We have this anomaly where the concessional contribution cap indexes on a $2500 base level, but it doesn’t index annually, but we have until this point in time for the last few years an evolutionary SG rate that has gone up by point-half a per cent every year,” Miller told attendees during a recent presentation for SuperGuardian.
He pointed out the maximum contribution base, which ensured SG contributions would not result in a fund member having excess CCs, was indexed in line with average weekly ordinary time earnings (AWOTE), like the CC cap.
“Last year, the maximum contribution base cap was $65,500 and if we applied indexation in line with AWOTE, that number would be sitting around $67,000,” he said.
“When you make a 12 per cent SG contribution on $67,000, it would mean you would be contributing more than $7500 each quarter, which would result in an excess contribution.”
According to Miller the ATO can revise the maximum contribution base formula to ensure employer SG contributions do not exceed an individual’s CC cap.
“So what we’ve seen for this year, for the first time, is the maximum contribution base has actually decreased, it’s gone from $65,000 down to $62,500,” he added.
“If we do see a concessional cap increase for the 2026/27 year, then we’ll see that maximum contribution base go up again because the SG will stay at 12 per cent and we are not having these two competing amounts moving.
“It’s always been a reset year [because of the SG], but this is a bit of an anomaly and a different issue from an indexation point of view.”
