Federal Budget 2024 – Impacts on Superannuation and Retirement Planning
The Budget was a fairly low-key affair with respect to super this year, but a few things are worthy of note:
Super on Paid Parental Leave
Having said that the announcement that the Government will pay superannuation guarantee on Commonwealth funded paid parental leave payments will go some way to bridging the superannuation gap that occurs when parents take time out of the workforce immediately following the birth of a child. Parental payments are based on the national minimum wage amount are subject to rules around work tests, income tests and residency rules and it is expected that an equivalent superannuation guarantee rate of 12% will apply to the parental payments. Further details are available on the Services Australia website.
Deeming Rates Frozen
Current deeming rates will continue to be frozen until 30 June 2025. This effectively forestalls the deeming rate from increasing from 0.25% to 2.25% until 1 July 2025 and this will be of benefit to recipients of age pension with financial assets subject to deeming. It will also assist as it will apply to the deeming rates used to calculate income for the purposes of the Commonwealth Seniors Health Card – even wealthier super members will benefit from this.
SuperStream Funding
SuperSteam was announced all the way back in 2011 and became legislation under the colloquially known ‘Stronger Super’ Bill of 2012. It had the lofty goal of streamling super payments and transfers, but if you’ve had anything to do with superannuation clearing houses and rollovers then you will know this has more than a few glitches. The Budget allocated increased funding to the SuperStream Gateway Network Governance Body to improve operations of the SuperStream system to remedy existing problem areas. Any improvements to the way SuperStream works will be welcome relief to employers and superannuation funds alike.
Div 296 Tax – Additional Tax for Superannuation Members with $3m or more in super
The Budget was largely silent on Division 296 tax – the provisions around introducing additional tax for those individuals with more than $3m in total superannuation. Having said that on Friday 10 May the Senate handed down their report on the proposed legislation and much to the chagrin of the many was passed without amendment. There is certainly more to play out with respect to this legislation – the least of which will be an upcoming election. That together with an implementation date of 1 July 2025 will mean we will have much more to talk about in this respect as we plan for the end of 30 June 2025 tax year.
Superannuation Year End Planning
Minimum Pension Withdrawals
If you have a pension account in your super fund, as we approach 30 June, now is the time to check that you have withdrawn your minimum annual pension payment. In order to claim a deduction for exempt pension income you must have withdrawn the minimum amount before 30 June. If you are unsure of your minimums please contact us.
Contributions to Super
Contributions made to super by your employer, and contributions you make personally that you would like to claim a tax deduction for on your income tax return are limited to a total of $27,500 per individual. This is your concessional contribution cap. Contributing up to your cap to reduce taxable income is a simple but very effective tax minimisation strategy.
Remember though if you are making personal contributions to superannuation that you want to claim a deduction for you need to complete a “Notice of Intent to Claim a Deduction” form and provide it to your superannuation fund and you need to receive an acknowledgement from your fund confirming they have treated your contribution this way in order for it to be claimed on your individual tax return. Industry funds usually work on a cut off date prior to 30 June so contact your superannuation fund now if you have any questions in this regard.
Did you have under $500,000 in total superannuation at 30 June 2023? If so, have you contributed less than your cap amount at any time in the last 5 years. You may be able to claim a deduction for contributions over $27,500 by soaking up that previously unused cap amount from prior years.
This is a really great strategy for offsetting taxable income and if this is the case we recommend you contact us for assistance in working our your individual carried forward concessional cap. This information is also available from MyGov if you have a MyGov login and have linked your Tax Account.
Superannuation – Timing is Everything!
Finally it’s worth noting that your superannuation fund needs to have received your superannuation contribution as cleared funds on or before 30 June in order for you to be able to claim a tax deduction for superannuation. Be aware if you are paying super for employees via a clearing house you need to allow enough time for the clearing house to pass funds on to the superannuation fund (remember the SuperStream headaches mentioned earlier??)
It’s worth noting too that the concessional contribution cap will increase from $27,500 to $30,000 on 1 July 2024. The non-concessional cap (after tax contributions to super) also increases from $110,000 to $120,000.
Contact us if you for more details if you have any questions regarding super caps leading up to 30 June.
