New Year, New Opportunities
Wealth Management Solutions

Anne-Marie Tassoni, Partner 

Matthew Nolan, Analyst 

A new financial year has arrived, and with it comes a new set of changes to superannuation. On the back of decade-high inflation, a number of updates have come into effect as of 1 July 2023 across every phase of superannuation, many of which present investors with new or expanded opportunities to maximise their retirement savings.
Posted 19 July 2023

Arguably the most significant change to superannuation this year is the indexation of the Total Superannuation Balance, or ‘TSB’. Put simply, this is the sum of your superannuation interests across all tax phases and all accounts. Primarily, it is used as a means of determining your eligibility for Non-Concessional (after-tax) contributions in each financial year. The indexation of the TSB on 1 July has seen this threshold increased from $1.7 million to $1.9 million, with benefits afforded to those with balances below this amount and under the age of 75 years. 

Now, those with TSBs under $1.68 million on 30 June 2023 can 'bring-forward' three years' worth of Non-Concessional Contributions, adding up to $330,000 to their superannuation this financial year – being $110,000 as this year’s annual contribution (FY24), plus $220,000 for the next two financial years (FY25 and FY26). Those with TSBs somewhere in between $1.68 million and the $1.9 million TSB cap have slightly lower bring-forward allowances: 

The primary benefit to these changes is the ability to now boost your Total Superannuation Balance to the $2 million mark. 

Like the TSB, the Transfer Balance Cap, or ‘TBC’, has also been indexed from $1.7 million to $1.9 million, potentially allowing an extra $200,000 of tax-free capital for retirees. The Transfer Balance Cap is relevant to those who have commenced a pension or are about to, subject to a few caveats: 

  • If you are yet to transition into the pension phase but are eligible to start a pension based on your age and work status, you can now convert up to $1.9 million of your accumulated superannuation (known as the ‘accumulation’ balance) into a tax-free pension stream.  

  • If you are already in pension mode but your balance is below $1.7 million, there may be the opportunity to add more to your pension, but herein lies the caveat; the increase in your personal TBC will be calculated based on the year you first commenced a pension and your highest ever pension balance, so the full indexation increment of $200,000 cannot be taken advantage of.  

Since the 2020 financial year, the annual minimum pension requirement has been reduced to 50% of the typical rate as part of the Government’s Covid-19 stimulus package. This meant that those in pension phase have only been forced to withdraw half the amount of their pension, and therefore, have been able to retain a higher level of capital in a tax-free environment for the past four years. That ‘reprieve’ is now over, and minimum pensions have reverted to normal, pre-Covid rates from 1 July. 

If you have been operating a pension and took advantage of this 50% reduction in the minimum pension over the past few years, your pension payable this year will effectively double (all other things such as age and balance being equal). If you were already drawing more than twice the minimum pension rate last year, then your payments may not be affected, or only slightly increased.  

The new rates for the 2024 financial year are set out below. 

Let's take the example of Julie, a retiree aged 82 years who had a pension balance of $1.5 million on 30 June 2022. In the last financial year, at a minimum, Julie had to take a pension of at least $52,500, or 3.5% of her pension balance. Now, let’s say Julie’s pension balance was worth $1.57 million a year later on 30 June 2023 as a result of investment earnings. From 1 July, the discontinuation of the reduced minimum rate means that Julie must now withdraw at least 7% of her balance ($109,900) in pension payments over the course of this financial year – more than double what she withdrew last year. 

The final noteworthy change to be introduced is the increase to the Superannuation Guarantee (‘SG’), otherwise known as mandatory employer contributions. As of 1 July, employers will now be required to contribute 11% of an employee's salary and wages to their superannuation, increasing from 10.5% in financial year 2023. This increment is part of the policy first introduced in 2012 to gradually increase the SG rate from 9% to 12% by the 2025/26 financial year. 

This will be viewed from two perspectives; it increases forced savings which means a higher amount is invested for retirement, or it decreases the employee’s 'take-home' pay if an employer chooses not to increase the employee’s total package by the amount of the SG increase. 

Cameron Harrison have been advising business owners and their families on asset allocation and intergenerational wealth management for over 50 years. We have demonstrated over a long period our ability to manage investments through both the good times and bad by keeping the client at the centre of our business. 

For more information on our approach to wealth strategy and investment management, please contact us on +613 9655 5000. 

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