New year, new super rules
The experts at BDO outline the key things you need to know about the new superannuation rules around contributions and pensions for a successful year ahead.
When making superannuation contributions, it is important to ensure that any contributions made remain within the prescribed caps and limits, to avoid paying additional tax.
The following outlines the general contribution caps for the new financial year ending 30 June 2024. It is important to note that these caps may differ based on your individual circumstances.
To understand more about your individual contribution caps, speak to your local BDO adviser before making any changes to your superannuation.
Concessional Contributions
Concessional contributions are amounts paid into superannuation and, where eligible, can be claimed as a tax deduction. These amounts are included in the fund’s assessable income and include:
- Employer contributions
- Salary sacrificed contributions
- Personal contributions for which the member is entitled to claim a tax deduction.
Members aged over 67, must fulfil the work test, which involves working at least 40 hours over a consecutive 30-day period during the financial year the contributions are made. This is a requirement for the contributions to be treated as personal concessional contributions, and for the deduction to be claimed in their personal tax returns.
If an individual’s total superannuation balance is less than $500,000, there may be an opportunity to utilise their carry forward unused concessional contribution caps. Allowing an individual to access any unused concessional contribution amounts from the last five years. Speak to your local BDO adviser to determine your eligibility.
Non-concessional contributions
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Non-concessional contributions are voluntary after-tax contributions made into the fund and are tax-free. These can include:
- Personal contributions where no tax deduction is claimed
- Non-assessable amounts transferred from a foreign super fund
- Contributions made in excess of the concessional contributions cap, which is left in the fund.
The following are also considered tax-free contributions, but do not count toward the non-concessional contribution limits:
- Contributions made under a CGT retirement exemption election
- Contributions made under a downsizer arrangement
- Government contributions (including low-income super contributions & co-contributions).
The eligibility for making non-concessional contributions is determined by an individual’s total superannuation balance as of 30 June 2023.
Depending on an individual’s total superannuation balance and their eligibility to utilise the bring-forward rule, contributions in excess of the non-concessional caps can be made, with the utilisation of the bring-forward rule, which ‘brings forward’ up to two years of non-concessional caps. The general bring-forward limits are as follows:
Super guarantee
The government’s plan to progressively increase the superannuation guarantee amount to 12 per cent by July 2025 continues, with the superannuation guarantee for employees increasing from 10.5 per cent to 11 per cent as at 1 July 2023.
Individuals with pre-existing salary sacrifice arrangements should take extra care to ensure that the increase in superannuation guarantee paid by their employer does not result in them exceeding their concessional contribution caps of $27,500.
Income stream changes
From 1 July 2023, there are several changes affecting income streams paid from superannuation funds that must be taken into account to ensure your fund is continuing to meet its obligations.
Transfer balance cap indexation
From 1 July 2023, the general transfer balance cap is due to increase to $1.9 million.
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Individuals who are looking to commence their first retirement phase income stream (pension) from 1 July 2023 onwards will have a transfer balance cap of $1.9 million, whilst individuals who commenced their pensions prior to this will have a personal transfer balance cap between $1.6 million to $1.9 million.
Minimum pensions ceasing
As a result of COVID-19, the Australian Government introduced a temporary 50 per cent reduction in minimum pension payments.
30 June 2023 saw the cessation of this reduction in minimum pensions, and all future minimum pensions will revert to the original minimum pension requirements:
When making pension payments for the year ahead, make sure you’re factoring in the above minimum withdrawal amounts to avoid tax implications.
Transfer balance account quarterly processing
From 1 July 2023, all members with pension balances must report all Transfer Balance Account movements quarterly.
Common reportable transfer balance account movements include:
- The commencement of new pensions, including death benefit pensions
- The commencement of reversionary pensions 12 months from the time the individual is entitled to receive the pensions
- Ceasing a pension (known as a full commutation)
- Taking a lump sum out of the pension (known as a partial commutation).
Checklist
To make the most out of your super and ensure you are considering the changes outlined in this article, use these steps as your checklist:
- Check with your local BDO adviser about your relevant contribution caps for the year ahead
- Ensure all salary sacrifice agreements have been reviewed to ensure that you are not exceeding your contribution caps with the increase in superannuation guarantee
- If making pension payments, ensure that you are factoring in the appropriate minimum withdrawal percentage
- If commencing, ceasing, or commuting from pensions, contact your local BDO adviser to ensure the relevant transfer balance account movements are reported.
How BDO can help
As the rules around contributions and pensions can vary greatly depending on individual circumstances, we recommend contacting your local BDO adviser before making contributions or taking pension payments to ensure all the relevant caps, requirements and documentation needs are met.
Prepared by Diana Wong, Manager, Superannuation, Business Services
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