Higher paid local government employee contributions

What is the concessional contributions cap?

The Australian Government caps concessional (pre-tax) super contributions, with the current cap set at $30,000 for all individuals for the 2024/25 financial year.

Find out more in our Contribution caps information sheet or on the Australian Taxation Office (ATO) website.

Am I likely to exceed the concessional cap?

Members on higher salaries with accumulation accounts are most likely to exceed the concessional contributions cap.

The higher employer contribution rates that apply to local government employees under the Local Government Act, combined with optional member contributions, further increases the likelihood of exceeding the cap.

* Assumes salary sacrifice and this contribution can be reduced or ceased from 1 July 2024.
^# Approximate for the financial year shown above using figures rounded down to nearest $500.

What are my options?

The Local Government Act allows employees who will exceed the cap to limit concessional contributions to the amount of the cap and take any additional amount as salary.

This is offered at the employer’s discretion. If you are impacted, you may be able to come to an agreement with your employer regarding the employer contribution rates that apply to you. This arrangement cannot be used to reduce your contributions below the concessional contributions cap for the year – only to the cap.

This legislation does not apply to members with a Defined Benefit account and these members are also unable to reduce their employee contribution.

Can I simply stop contributions once I reach the cap?

Your employer is still required to meet superannuation guarantee contribution requirements each quarter, at a minimum. This means contributions cannot be stopped for an entire quarter or longer period. An agreement made part way through the year will help but may not stop you from exceeding the cap.

Over a full financial year, this measure can reduce contributions to the cap (unless you make extra salary sacrifice contributions above the required member contribution, claim a tax deduction for a personal contribution, or have concessional contributions paid into your account from another source).

Would it help if I made my contributions after tax?

If you choose to make the required member contributions from after-tax pay, they will not count towards your concessional cap. Instead, they will count towards your non-concessional contributions cap (which is $120,000 for the 2024/25 financial year). The tax implications of this decision depend on your personal circumstances.

Brighter Super offers single issue financial advice on contributions at no additional cost to members. Call us today to arrange an appointment.

What if I make extra contributions to my super?

The only contributions that can be reduced under this relief are the compulsory contributions mandated under the Local Government Act. Employers cannot take into account any extra amounts you are paying into super when they are reducing contributions to the cap.

Any other salary sacrifice super contributions, personal contributions for which a tax deduction is claimed, or contributions from other employers, will also count towards the concessional cap but cannot be addressed by this relief.

What do I need to do?

If you are likely to exceed the concessional contributions cap due to employer contribution rates, you should discuss the option to reduce your contributions with your payroll department.

You can only benefit to the extent that you reach the concessional cap.

Any agreement with your employer to reduce contributions under the relief must be in writing. At a minimum the agreement needs to include:

• your name
• date the agreement comes into effect
• dollar amount of the contributions to apply
• the time period the contribution amount will apply to

The agreement will need to be revised if the concessional cap changes (e.g. from 1 July 2024 when the concessional cap increased to $30,000).

What if my employer can’t do this?

Your employer must agree to the arrangement. Unfortunately, if your employer will not or cannot participate, you will be unable to take advantage of this relief.