5 super and pension changes from 1 July 2023

Here’s a snapshot of what you need to know.

Depending on your situation, a number of changes could create opportunities. Here’s what came into effect on 1 July.

• Compulsory employer contributions went up
• Government co-contributions were made available to more super members
• More people with larger super balances can make additional non-concessional contributions under the bring-forward rule 
• The transfer balance cap, which is the amount of super savings you can transfer into a retirement pension, increased
• Minimum pension drawdown rates reverted to pre-covid rates. 
  
   

1. Compulsory employer super contributions increased

The contributions your employer is required to make into your super fund, under the Super Guarantee (SG), increased from 10.5% to 11% of an employee’s before-tax salary or wages. 

The SG rate is scheduled to increase further and gradually reach 12% by 1 July 2025.

What this means is eligible employees should have more savings in their super to help fund their retirement. 

2. Government co-contributions available to more super members

If you’re a low or middle-income earner (you might be starting out in your career or working part time) and make non-concessional contributions to your super, you may be eligible for a co-contribution of up to $500 from the government.

Non-concessional contributions (also known as after-tax contributions) are voluntary contributions you can make using after-tax dollars, which you don’t claim a tax deduction for.

To receive the maximum co-contribution, subject to meeting all other eligibility requirements:

• you need to make one or more non-concessional contributions of at least $1,000, and 
• your total income for the 2023/24 financial year must be equal to or less than $43,445. Last financial year this figure was $42,016.

This financial year, if your total income is between $43,445 and $58,445, your maximum entitlement will reduce as your income rises. If your income is equal to or greater than $58,445, you won’t receive any co-contribution.

If you’re eligible, you’ll also need to make sure you’ve provided your tax file number to your super fund and that you’ve lodged your tax return for the year. The ATO will calculate the amount owing to you and deposit any co-contribution into the super fund you made your contribution.

Keep in mind co-contribution income thresholds are indexed each year and may change in future.

3. More people can make additional non-concessional contributions

Currently, the annual cap on non-concessional contributions is $110,000.

However, if you’re under age 75, you may be able to contribute above this limit and make up to three years of non-concessional super contributions, under what’s known as the bring-forward rule.

How much you can make as a non-concessional contribution will depend on your total super balance as at 30 June of the previous financial year.

Prior to 1 July 2023, your total super balance needed to be below $1.48 million for you to be able to contribute the full three years of annual caps ($330,000) under the bring-forward rule. On 1 July 2023, this threshold increased to $1.68 million.

If your total super balance is above this limit, your ability to bring forward future year caps may be reduced, or not available at all, meaning only the standard annual cap (or no cap) may apply.

See the table below to get an idea of the increases in the different thresholds and the amount of non-concessional contributions you may make under the bring-forward rule from 1 July 2023 (depending on your total super balance on 30 June of the previous financial year).

4. The transfer balance cap increased

The transfer balance cap limits the amount of super savings you can transfer to a retirement pension. 

The cap, which increases in line with inflation, was originally set at $1.6 million on 1 July 2017, then increased to $1.7 million on 1 July 2021, and increased again to $1.9 million on 1 July this year. 

If you haven’t already started a retirement pension, the new cap will apply to you, but if you’ve already started a pension, how much you can transfer will depend on how much of your cap you’ve already used. 

You can check out your transfer balance cap info via the ATO section of your myGov account from 11 July 2023.

5. Minimum pension drawdown rates reverted to pre-covid rates

The minimum amount that you must be paid out of an account based pension or transition to retirement (TTR) pension each year was halved by the government in the 2019-20 financial year due to the economic impact of covid. 

These rates reverted back to the standard minimum drawdown rates on 1 July 2023. 

Below are the reduced rates compared to standard rates for account based pensions and TTR pensions (known as pre-retirement pensions at CFS), based on your age.

Keep in mind, reverting to the full rates could see your pension payments as much as double, and increase even more if you’re moving into a different age band. 

Read about the recent changes in our article: Minimum Pension Payments

Looking for more information?

More changes have been proposed as part of the 2023-24 Federal Budget. See our Federal Budget wrap up for more details.

Meanwhile, if you have any questions on the above matters, please speak to your adviser or use our find an adviser service to locate one near you.