End of Financial Year: Superannuation & Upcoming Changes
Written by Regina Hocking, Financial Adviser & Director of Rebel Wealth Management Pty Ltd.
As the end of the financial year approaches, it's crucial to review your financial strategies and plan for the new financial year ahead.
This article will discuss the importance of end-of-financial-year strategies for superannuation and the upcoming changes from 1 July 2024. Please consult your Financial Adviser and/or Accountant for more personalised advice.
What Changes are Coming for Super and Tax from 1 July 2024
The Australian Government has announced several significant changes to superannuation rules from 1 July 2024 that will impact how your super is paid and how you plan for retirement.
Super Guarantee Increase: The Super Guarantee (SG) rate, which determines the minimum percentage of your salary that your employer must contribute to your super fund, will increase from 11% to 11.5%.
Super Contribution Caps Increase: Both the concessional and non-concessional contribution limits will increase, allowing you to put more of your money into super. Here are the new contribution caps:
Concessional Contributions
Concessional contributions in Australian superannuation are pre-tax payments into your super fund. They include employer contributions, salary sacrificing contributions, and personal contributions you can claim as a tax deduction. These are taxed at a flat rate of 15% by the super fund.
Current Cap: $27,500 New Cap from 1 July 2024: $30,000
Non-Concessional Contributions
Non-concessional contributions in Australian superannuation are payments made into your super fund from your after-tax income. They are not subject to the 15% tax rate unlike concessional contributions.
Current Cap: $110,000 New Cap from 1 July 2024: $120,000
Income Tax Rates Cuts
The Australian Government has made changes to individual income tax rates and thresholds from 1 July 2024. This will apply to all taxable income you earn from 1 July 2024. The changes will not impact your 2023–24 tax return.
From 1 July this year, these changes will:
- reduce the 19 percent tax rate to 16 per cent
- reduce the 32.5 percent tax rate to 30 per cent
- increase the 37 percent tax threshold from $120,000 to $135,000, and
- increase the 45 percent tax threshold from $180,000 to $190,000.
You can calculate your own income tax cut on the Australian Taxation Website here: Tax cuts for every Taxpayer
Superannuation Strategies
Superannuation is a long-term investment designed to provide income during retirement. Making additional contributions to your super can be a tax effective way to build retirement wealth.
As we approach the end of the financial year, it's an excellent time to review your superannuation contribution strategy. This is of particular importance as there are cut off dates for super funds receiving contributions within this financial year. The financial year in which a contribution is received will affect your contribution caps and your taxable income position, particularly if you breach cap limits.
Superannuation Contribution Types
Personal Contributions (non-concessional): If you have surplus cash, making non-concessional contributions can be a great way to boost your super balance and potentially reduce your tax. This can be small amounts regularly or larger lump sums more infrequently.
Salary Sacrificing (concessional): Salary sacrificing into your super can be a tax-effective way to increase your super balance. The sacrificed portion goes directly into your super fund where it is taxed at 15%, rather than your marginal tax rate. When you opt for salary sacrifice, the sacrificed amount is deducted from your pre-tax income. As a result, your overall taxable income decreases, leading to potential tax savings.
Carry Forward Concessional Contributions: Not many know about this contribution strategy, however, if you have a total superannuation balance of less than $500,000 at the end of 30 June in the previous financial year and do not use the full concessional contributions cap of a certain year, you can carry forward the unused amount and use it in subsequent financial years (up to a maximum of 5 years).
Here are the concessional contribution caps for the last five financial years:
2019-20: $25,000
2020-21: $25,000
2021-22: $27,500
2022-23: $27,500
2023-24: $27,500
Total $132,500
The above is not an extensive list of all super contribution types available, however, they are some of the more common strategies I advise on regularly with clients.
Notice of Intent to Claim a tax deduction: if you are planning to claim a tax deduction for some of your super contributions, you will need to formally notify your super fund of this intent. As always, please speak to your Accountant and/or Financial Adviser for further assistance on what you can claim.
Important to note: all super funds will have their own processing times and cut off dates to receive your contributions. Below are some super fund examples and their super contribution cut off dates for the end of the 2024 financial year:
Hub24 Super: 4pm AEST Friday 21st June 2024 for BPAY contributions, speak to your Adviser or Hub24 for other methods and dates.
Australian Super: The cut-off date for receiving contributions is 5pm AEST Friday 21 June 2024.
BT Panorama Super: The cut-off date for receiving contributions is 5pm AEST Friday 28 June 20245.
Please note that these dates are subject to change and it’s always a good idea to check with the individual super fund for the most accurate information. Remember to allow enough time for your contributions to be processed and received by the super fund before the cut-off date.
Planning for the end of the financial year is an essential part of managing your finances and should not be left until the last minute.
By reviewing your superannuation strategies and understanding the upcoming changes with your Financial Adviser and/or Accountant, you can ensure you're in the best possible financial position. If you don't have a Financial Adviser and are interested in finding out more, please browse our website to learn more about our services we offer. You can contact us on the details from the home page.
Source(s) not linked in the article:
1. Contributions caps - Australian Taxation Office
2. Tax cuts for every Taxpayer - Australian Taxation Office
Regina Hocking
Director | Financial Adviser FChFP, GradDipFinPlan
Rebel Wealth Management Pty Ltd
Authorised Representative 001234469