Wait for it – drum roll! From 1 July 2024, your superannuation guarantee (SG) contributions increased from 11% to 11.5%. You may not notice it much now, but it will add up over years thanks to the power of compounding interest.
It’s been a long and winding road from 1988 when NGS Super was set up and Catholic school employers and the Association of Indpendent Schools began contributing 3% of salaries, to 1992 when the Keating Labor government introduced universal super, also at 3%, to the current super guarantee of 11.5%.
The original design, established by the Keating Labor government, aimed for a 12% employer contribution for all workers. It’s just moved up to 11.5% and will move up again to 12% on 1 July 2025.
This increase will assist in providing workers in Australia with a dignified retirement as well as creating a substantial pool of national savings.
Lifting of concessional cap
Another significant change is the lifting of the concessional contributions caps. It moves up from the current $27,500 a year to $30,000 per annum. The caps are called ‘concessional’ because those who contribute receive a tax discount and pay 15% tax when the money goes into super.
It should be noted that employer contributions are counted in the $30,000 limit as are salary sacrifice contributions. So, the real benefit of salary sacrifice contributions is the difference between the marginal tax payable and the concessional 15%.
When planning your level of contributions for the new financial year, it may be advisable to contact your fund or a financial planner or your business manager to set your salary sacrifice amount. There is also a provision to use up unused caps for the previous five years for those who want to build up their super via a lump sum.
The five-year unused cap limit for this financial year is $137,500. Again, tax rules apply so it’s best to check with your fund or financial planner to ensure you’re within the boundaries of the unused caps provisions.
Lifting of non-concessional cap
Non-concessional superannuation caps have also been lifted. This refers to after-tax money you may wish to contribute into super. Since the government assumes that tax has already been paid on these contributions, there is no further tax payable when received by the super fund up to the cap.
The new cap is $120,000, up from $110,000 from the last financial year. Non-concessional contributions can come from the sale of a property, the sale of financial assets such as shares or, in some cases, an inheritance.
It is also possible to gross up these payments for three years ahead to an amount of $360,000. These contributions are only available to people with balances under $1.9 million. And the maximum transfer balance cap for a superannuation pension (income stream) is also $1.9 million for those under the age of 75.
Pensions and income streams
For those receiving an account-based pension or income stream, the beginning of a new financial year is a good time to ‘refresh’ it. Are you satisfied with your investment options? Are your payments adequate to suit your lifestyle? Do you require the minimum drawdown, or a higher amount?
The minimum drawdown requirements are: 4% for under 65; 5% for those between 65 to 74; 6% for ages between 75 and 79; 7% for ages 80 to 84; 9% for 85 to 89; 11% for 90 to 94; and 14% for 95 or over.
This is because successive governments want members to use and spend their super rather than keep it for estate planning. If you have any questions regarding your account-based pension, contact your fund to assist you with the ‘refresh’.
Understand insurance
And it’s always important to check and understand your insurance. Most industry funds offer life cover, total and permanent disability insurance and many also offer income protection. As your life circumstances change, it may be prudent to change your insurance cover to ensure you are not paying too much or perhaps your cover is inadequate for your needs.
Are your beneficiaries up to date, or has your situation changed? Events such as the birth of a child, a marriage/divorce or a pay increase may give rise to a need to update your insurance cover. Insurance offered through an industry fund is a genuine benefit because the sheer size of the policy helps to reduce the cost.
So, some things to think about for this new financial year. Contact your fund for help if you think you need it. Take the time to understand how your super and insurance work. You don’t have to be at the end of the long and winding road to retirement to take advantage of the benefits offered through superannuation. You can do it earlier.