As we approach the new financial year, superannuation rule changes will see widespread benefits for Australians across all stages of life.
All employees are set to receive a 0.5 per cent raise in their superannuation guarantee contribution as of July 1, increasing to a total of 10.5 per cent, following the Coalition’s pledge to reach a 12.5 per cent guarantee by 2025.
In addition to this supplement, the changes have removed the current minimum earnings requirement, which previously excluded employees earning less than $450 per month. This means all employees will be entitled to superannuation contributions, irrespective of monthly income earned.
Many retirees will also benefit from the changes, which will see the eligible age to benefit from a downsizer contribution lowered from 65 to 60.
The downsizer contribution is excluded from other forms of contributions to superannuation and allows each individual member to deposit up to $300,000 from the sale of a home (given it was owned for 10 years) regardless of fund balance.
Individuals will also be eligible to deposit superannuation contributions until age 75, an increase from the previous age limit of 69.
The requirement to meet the ‘Work Test’ in order to contribute has also been removed. However, members aged between 67 and 74 will still be required to meet the work test if they are wanting to claim a tax deduction for personal concessional contributions.
This change will impact the bring-forward provisions, allowing members to elect to contribute up to three years of Non-Concessional Contributions totalling $330,000 in one year.
The previously enacted pension minimum concessions (50 per cent reduction in compulsory minimum withdrawal) has been extended for another year.
For the younger generation, a substantial increase has been made for those wishing to benefit from the First Home Super Savers Scheme, whereby an individual can access up to $50,000 of previous eligible contributions to purchase their first home.
This benefit extends to couples, who can access a combined total of $100,000 to be used as a deposit for a first home. It must be noted that only 85% of total concessional contributions can be released, however this can include notional associated earnings from the contributions.
Individuals who drew on their super to survive the pandemic under the COVID-19 super access scheme will have the ability to re-contribute the early release withdrawal amount. Members can contribute this money back to their super to increase their balances without impacting their Non-Concessional Contribution cap allowance in the year.
Limits to the transfer balance cap have remained the same for FY23 at $1.7 million. The benefit for some individuals relates to the recent market sell off, which may mean that their closing balance at June 30 will be below the threshold, preventing further contributions.
Prior to the end of financial year, members who are close to their cap may want to withdraw some additional funds to ensure they remain below this threshold. Qualifying by $1 may enable you to contribute a whole year of Non-Concessional Contributions up to $110,000.
In summary the FY23 changes lead to superannuation benefits for Australians across all generations, ensuring their retirement savings continue to be of a substantial benefit.