1. Super Guarantee Rate Increase
From 1 July 2023 the new super guarantee (SG) rate is 11%, increased from 10.5% last financial year.
Business owners will need to ensure that payroll and accounting systems are updated. The ATO’s SG calculator helps employers work out the correct amount of super payable to their staff.
Employees can utilise the ATO’s super estimator to work out how much super you are entitled to, and should check their super account.
The SG rate is scheduled to progressively increase to 12% by July 2025.
2. Super Co-Contribution Increase in Income Thresholds
The super co-contribution is designed to assist eligible individuals with low and middle-income to save for their retirement. If you are eligible and make personal super contributions during a financial year, the government will pay a super co-contribution of up to $500.
If you earn less than $43,445 in 2023/24 you may be eligible for the full $500 co-contribution from the government, and if you earn more than $43,445 but less than $58,445 you may be eligible for a partial co-contribution. These income thresholds have increased from the prior financial year.
3. Age Limit for Downsizer Contributions Reduced to 55
The downsizer contribution is an initiative which allows individuals to contribute funds from the sale of their home into superannuation, designed to help older Australians downsize from large homes.
Individuals can contribute up to $300,000, couples up to $600,000, even when the usual contribution rules mean you wouldn’t normally be eligible to add to your super.
The eligible age for downsizer contributions has reduced from 60 to 55 years from 1 January 2023.
4. Increase in the Transfer Balance Cap
Retirees have the choice of accessing their superannuation as a lump sum, an income stream from a pension account, or a combination of both. The transfer balance cap is the upper limit amount of superannuation that a retiree can transfer into a pension account. Since income earned on the capital that is supporting the income stream of a pension account is tax-free, the transfer balance cap was introduced to reinforce the role of superannuation to provide retirement income, rather than a means to reduce tax or hold intergenerational wealth. On 1 July 2023, the transfer balance cap will be increased from $1.7 million to $1.9 million in line with inflation.
5. Superannuation Minimum Drawdown Rates
If you have a super income stream, there is a minimum amount that you must withdraw each financial year. Due to Covid-19, the minimum drawdown rates were temporarily reduced. The temporary drawdown reduction has ended from 1 July 2023.
The current minimum drawdown rates depend on age, as follows:
• Aged 55 to 64 – 4%
• Aged 65 to 74 – 5%
• Aged 75 to 79 – 6%
• Aged 80 to 84 – 7%
• Aged 85 to 89 – 9%
• Aged 90 to 94 – 11%
• Over 95 – 14%
6. The Age Pension Eligibility Age Increase
On 1 July 2023, the eligibility age for receiving the Age Pension increased from 66 years and 6 months to 67 years. The residence requirements, income and asset tests apply and have not been changed.
7. 2022 Changes Still in Place
Up until 1 July 2022, Australians aged 67–74 could only make voluntary contributions to their super if they’d worked at least 40 hours during a 30-day period in the relevant financial year. The work test was removed to make the system more flexible for older Australians to continue to work and increase their super. Personal super contributions are permitted for individuals under age 75, irrespective of employment status.
If you have any questions about superannuation or planning for retirement, please contact me on (02) 9908 9888, or email wealth@edneyryan.com.au.