As our superannuation balances grow larger, it makes more sense than ever to keep track of the many rule changes that have recently happened or are coming up soon.
Australians are investing more in super – almost $151 billion in the year ending March 2023, an increase of 11.3%.
Those extra contributions, plus the rebound in the financial markets, have resulted in super assets of around $3.5 trillion.
Quarterly rate of return
To keep your super on track for a comfortable retirement, check out these latest changes in case they affect you.
Super bonus for workers
For employees, the new financial year kicks off with an increase in the Superannuation Guarantee paid by employers. It is now 11% of eligible wages.
This rate will increase by 0.5% each year until it reaches 12% in 2025.
The Australian Tax Office will also be cracking down on employers who don’t pay on time or at all. From 1 July 2026, super must be paid at the same time as wages rather than at the end of each quarter.
The recent Federal Budget also provided funds to help the ATO enforce super payments and recover unpaid amounts.
The minimum pension drawdown increased
A COVID-19 measure to reduce the minimum drawdown required on super pensions ended on the 1st of July 2023.
Investors receiving super pensions and annuities must withdraw a minimum amount each year. The federal government reduced this amount by 50% over the last four financial years to help those wanting to protect their capital as the markets recovered from the chaos of the pandemic.
You can find out more by visiting the ATO’s minimum pension standards.
Transfer balance cap to be lifted
The transfer balance cap limits the total amount of super that can be transferred into a tax-free pension account. This is a lifetime limit.
The cap is indexed and began at $1.6 million when it was introduced in 2017. Increases in the cap are tied to CPI movements.
You can see your transfer balance account and cap information in your online ATO account.
Extra tax for large balances
Investors with super balances of $3 million or more will lose the benefit of super tax breaks on earnings. From 1 July 2025, taxes on future earnings will be 30% instead of 15% although they will continue to benefit from more generous tax breaks on earnings from the funds below the $3 million threshold.
This change is expected to apply to around 80,000 people.
Further recent changes
Several changes announced in both Federal Budgets last year have also been slowly introduced over the past 12 months, including:
In one major change, the minimum age was lowered for those able to invest some of the proceeds of the sale of their homes into super, known as a ‘downsizer contribution’.
From 1 January 2023, if you are aged 55 or older, you can now contribute to your super up to $300,000 (or $600,000 for a couple) from the sale of their home.
The home must be in Australia and owned by you for at least 10 years.
First Home Super Saver Scheme
In another residential property initiative, a scheme that allows investors to use their super fund to save for their first home has been expanded.
The First Home Super Saver Scheme last year increased from $30,000 to $50,000.
The Scheme allows you to make contributions to your super and then apply to release them when you want to purchase your first home, provided you meet the eligibility requirements.
Removal of Work Test for under 75s
Another significant reform for many has been the removal of the work test for those under 75, who can now make or receive personal super contributions and salary sacrificed contributions. (Although the ATO notes that you may still need to meet the work test to claim a personal super contribution deduction.)
Previously if you were under 75, you could only make or receive voluntary contributions to super if you worked at least 40 hours over 30 days.
Removal of the $450 threshold
A further change introduced last year was the removal of the $450 per month threshold for super contributions.
Employers must now pay the super guarantee to all employees regardless of their earnings however, employees who are under 18 still need to work more than 30 hours a week to be eligible.
Low Income Super Tax Offset
The Low Income Super Tax Offset (LISTO) threshold remains at $37,000. LISTO is a government payment to super funds of up to $500 to help low-income earners save for retirement.
If you earn $37,000 or less a year you may be eligible for a LISTO payment. You don’t need to do anything other than ensure your super fund has your tax file number.
Finally, a project that may pay off down the track, the Federal Budget included continued funding for a superannuation consumer advocate to help improve investors’ outcomes.
Expert advice is important to help navigate these changes over the coming year.
Contact us for more information and advice today!