There are a few changes to super coming into effect on 1 July 2023.
Here’s how they may affect you.
Superannuation Guarantee increase
The Superannuation Guarantee (SG), the contribution that your employer is required to make
into your super fund, will rise from the current 10.5% to 11% from 1 July 2023.
A higher SG rate means potentially greater savings for your retirement.
Employers will need to update their payroll system to comply with this increase.
Superannuation increases will apply on the date that the employees are paid their wages. This
means that if an employee’s pay period spans across two financial years, the 11% superannuation increase will only apply to any wages that are paid after 1 July 2023.
Example:
John is paid fortnightly and his employer’s final pay run for the 2022-2023 financial year will
end on 5 July 2023.
As John’s wages for the relevant fortnight will be paid after 1 July 2023, the superannuation
contribution will be 11% for the whole period.
Employer Tips for being prepared for SG changes.
- Review current superannuation costs for all wage and salaried employees.
- Check salary packaged arrangements. Are your agreements inclusive/exclusive of
superannuation, or paid on top of the agreed salary? - For salary packages inclusive of super – check the contracts wording to make sure you apply the changes correctly as this change may also impact annualised salary arrangements.
- Calculate your revised payroll costs from July, identify current wages and superannuation
expense and compare to the new rate from July, so you know precisely what the impact will be. - Before you run your first payroll after 1 July 2023, check that the payroll software
superannuation rate has been correctly updated to 11%. - Remember, short payment or late payment of SG can incur hefty penalties – plan now for higher payroll expenses from July so you don’t get caught short.
Removal of temporary reduction in superannuation minimum drawdown rates
The minimum drawdown requirements determine the minimum amount of a pension that a
retiree must draw from their superannuation to qualify for certain tax concessions. Introduced
during the COVID pandemic, the temporary 50% reduction of the minimum pension drawdown rates will end on 30 June 2023.
Returning, the government’s standard minimum drawdown rates will apply from 1 July 2023, as outlined below.
Age Standard minimum annual payment (%)
Under 65 4
65-74 5
75-79 6
80-84 7
85-89 9
90-94 11
95 or more 14
Increase to Transfer balance cap
The General Transfer Balance Cap (TBC) is a limit on the amount of superannuation that can be
transferred into retirement phase income streams, including most pensions and annuities.
From 1 July 2023, if you haven’t already moved money into a retirement income stream your
TBC will increase from $1.7million to $1.9 million.
If you have commenced a retirement income stream before 1 July 2023, your TBC will be
between $1.6 – $1.9 million (check your personal transfer balance cap with the Australian
Taxation Office (ATO)).
All retirement products you have will count towards this cap, which is managed by the ATO. You can open multiple retirement income streams if you remain below the cap.
One of the main benefits of transferring super savings into a retirement pension is that the investment earnings within your retirement pension account are generally tax-free, and from age 60 onward, so are any pension payments you receive.
Downsizer contribution eligibility
The government downsizer contribution is an initiative to assist older Australians move out of
homes that are now too big for their needs, and free up houses for younger Australians looking to buy.
As a reminder, from 1 January 2023, you are now eligible to make a downsizer contribution if
you are 55 or over. Previously, the eligibility age was 60. You can contribute up to $300,000 as
an individual or $600,000 as a couple to your super from the proceeds of selling your property.
This is possible even when the usual contribution rules mean you wouldn’t normally be eligible
to add to your super.
Navigating your way through superannuation contribution rules can be complex, especially leading up to retirement. If you have questions or need assistance implementing payroll updates regarding upcoming changes to the superannuation guarantee, please contact us.
Author
Naomi Aspromourgos
