Superannuation

Contribution Caps

February 28, 2024 By raadmin

The Institute of Financial Professionals Australia (IFPA) have reported that following the release of the latest Average Weekly Ordinary Time Earnings (AWOTE) data for the December 2023 quarter the government has announced it will increase contribution caps on 1 July 2024 as follows:

Concessional Contributions (CC) cap – $30,000
Non-concessional contributions (NCC) cap – $120,000
The maximum NCC cap permitted under the bring forward rules – $360,000

The Total Superannuation Balance (TSB) thresholds, which are used to determine the maximum available amount for bring-forward Non-Concessional Contributions (NCC), will be adjusted as follows:

TSB at 30 June 2024	Maximum NCC Cap	Bring Forward Period
< $1.66m	$360,000	3 years
$1.66 < $1.78m	$240,000	2 years
$1.78m to <$1.9m	$120,000	1 year
$1.9m +	$0	$0

Please note that the overall transfer balance cap will stay at $1.9 million for the upcoming financial year 2024-25, as the Consumer Price Index (CPI) did not reach the threshold required for a $100,000 increment.

The IFPA also commented that clients who have triggered the bring forward rule either in the current year (2023-24) or the prior year (2022-23) and are still within the bring forward period, will not be subjected to the raised Non-Concessional Contributions (NCC) cap under the bring forward rules. This occurs because the Non-Concessional Contributions (NCC) cap for an individual is determined based on the standard NCC cap at the time they initiated the bring forward rule in their first year. Therefore, individuals aiming to optimise their Non-Concessional Contributions (NCCs) through the bring forward rule may consider limiting their NCCs for the current year to $110,000 or below to avoid activating the bring forward rule in the current financial year.

If you have any questions on how the changes to the contribution caps will affect you, feel free to contact us to setup a meeting to discuss them with you.

Introducing Payday Super

May 31, 2023 By raadmin

The Government plans to introducea reform mandating the payment of superannuation on payday, which it believes will have a positive impact on the retirement incomes of millions of Australians.

As of July 1, 2026, employers will need to pay their employees’ super at the same time as they are paid. By doing so, they believe it will strengthen Australia’s superannuation system and enable a more dignified retirement for more workers in Australia.

For example, if a 25-year-old, with a median income were to switch to payday super, while receiving both their super alongside their wages, they could be $6,000 or 1.5% better off than when they reach retirement age.

It is claimed employers will experience a smoother payroll management with fewer accumulated liabilities on their records as a result of the more frequent super payments.

It will not only simplify the process of monitoring and managing superannuation payments for employees but also enhance protection against potential exploitation by disreputable employers.

According to the estimates of the Australian Taxation Office (ATO), approximately $3.4 billion worth of super went unpaid in years 2019-20, despite the majority of employers fulfilling their obligations.

The Government has allocated additional resources to the ATO to further strengthen the system and help detect unpaid super payments at an early stage. Furthermore, the Government plans to establish higher targets for the ATO in terms of recovering outstanding superannuation payments.

In the second half of 2023, the Treasury and the ATO will engage in close consultation with both industry representatives and stakeholders, regarding these proposed changes.

With the start date being July 1, 2026, this will hopefully allow employers, superannuation funds, payroll providers, and other parts of the superannuation system time to adequately prepare for the implementation of the reform.

For more information about these measures click here.

Changes to Superannuation Concessions

March 13, 2023 By raadmin

As of July 1, 2025, the current Government has proposed to reduce the tax concessions available to individuals whose total superannuation balances exceed $3 million. Any balances that exceed this threshold would be subjected to a tax of 30% based on their earnings and growth of any balance that has exceeded the threshold of $3 million.

Application

Starting on 1 July 2025, individuals whose total superannuation balances (TSBs) exceed $3 million at the conclusion of a financial year will be subject to an additional tax of 15 percent on earnings.

This is separate from any tax that their superannuation funds might pay on earnings during the accumulation phase. Consequently, earnings linked to balances over $3 million will typically be subject to a combined headline rate of 30 percent.

This change will take effect from the 2025-26 financial year onwards, and the tax will be applicable to the proportion of earnings (and growth) corresponding to balances above $3 million.

This implies that earnings associated with balances below $3 million will continue to be taxed at a rate of 15 percent or lower.

Earnings are calculated based on the variation in TSB (Total Super Balance) between the start and end of the financial year, taking into account contributions and withdrawals.

If negative earnings occur, they can be carried forward and applied to offset this tax in subsequent years.

Individuals have the option of paying the tax from their personal funds or their superannuation funds, and those with multiple funds can select the fund from which the tax is paid. This tax will be distinct from an individual’s personal income tax and is similar to the current Division 293 tax.

The calculation of earnings encompasses all notional (unrealised) gains and losses, mirroring how superannuation funds presently compute members’ interests.

Notice of Assessment and Reporting Process for Funds

TSBs surpassing $3 million will be assessed for the first time on 30 June 2026, with initial notices of a tax liability anticipated to be dispatched to individuals during the 2026-27 financial year. The Australian Taxation Office (ATO) will notify individuals of their obligation to pay this tax. The ATO already employs superannuation fund reporting to calculate the total sum that individuals have in the superannuation system, encompassing multiple accounts, which is also utilized for other objectives, such as verifying individuals’ eligibility to make non-concessional contributions.

No doubt there will be more detail on the operation of this change provided by the tax office as we get closer to implementation date.

For more information about these changes please click the link to the governments guide: Better targeted superannuation concessions – factsheet (treasury.gov.au)