Changes to your superannuation

The super guarantee rate goes up

The super guarantee is the amount your employer must pay into your superannuation fund.  The amount paid is a percentage of your gross salary. 

On 1 July 2022, the rate of super paid by employers increased to 10.5%.  From 1 July 2023, this will increase again, and all employers will be required to pay 11% of your gross salary. 

Minimum pension drawdowns

During the COVID-19 pandemic the Federal Government temporarily reduced the minimum pension drawdown rates for pension members.  This was first put in place for the 2019/20 financial year and was successively extended out to 2022/23.  However, on 30 June 2023, the COVID induced reductions to minimum drawdowns will come to an end.  This means that from 1 July 2023, the standard default drawdown rates will apply.

The general transfer balance cap is increasing

The general transfer balance cap (TBC) is the amount of money that you can transfer into a tax free retirement account.  From 1 July 2023, this amount will increase by $200,000 to $1.9 million. The TBC is indexed to the consumer price index each December.

Individuals have their own TBC. If your transfer balance account reached $1.7m or more at any point before 1 July 2023, your TBC after 1 July 2023 will remain at $1.7m. If the highest amount in your account was less than $1.7m, then your cap is proportionally indexed based on the highest ever balance your transfer balance account reached.

In calculating your adjusted TBC, the ATO will look at the highest amount your TBA has ever been, then apply indexation to the unused cap amount.

For example, if you started a retirement income stream valued at $1,200,000 on 1 July 2022 and this was the highest point your account reached before 1 July 2023, then your unused cap is $500,000 ($1.7m less $1.2m). This unused cap amount is used to work out your unused cap percentage ($500,000/$1,700,000=29%). The unused cap percentage is then applied to the indexation increase ($200k*29%=$58,823) to create your new TBC of $1,758,823.

You can view your personal transfer balance cap, available cap space, and transfer balance account transactions online through the ATO link in myGov.

Superannuation changes announced in the Federal Budget

Payday Super

The Federal Budget has proposed that from 1 July 2026, employers will be required to ensure each employee’s super guarantee payments are made into their super accounts at the same time their wages are issued, rather than on a quarterly basis as is currently the case.

New tax thresholds for balances over $3M

The Federal Budget has proposed that from 1 July 2025, all earnings on superannuation balances greater than $3 million will be charged an additional earnings tax.  This applies to the portion of the combined value of super and pension balances that exceed $3 million.  The proposed increased tax rate is 30%.  Balances below $3 million will continue to be taxed at the current 15% rate.  It is not proposed that the $3 million threshold will be indexed. 

It is intended that this change will also impact defined benefit funds.

Individuals will have the choice of either paying the additional tax personally or from their superannuation funds. Negative earnings can be carried forward and offset against this tax in future years’ tax returns.

Issued by Diversa Trustees Limited (ABN 49 006 421 638), (AFSL No 235153).

This article is general advice only and does not take into consideration your personal objectives, financial situation or particular needs. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Posted on 30 May 2023