If you’re looking to maximise your superannuation in the lead-up to retirement, it’s a good idea to be up to speed on any legal updates that could affect the super and tax landscape.
With super caps going up and tax cuts coming in, there are some big changes on 1 July 2024 that could help you boost your retirement savings.
Here’s how it’s all going to work…
Super caps are going up
There are annual caps – or limits – on how much money you can contribute towards super, both in terms of pre-tax ‘concessional’ contributions and after-tax ‘non-concessional’ contributions.
Both these caps are going up, so if you have any spare funds you’ll be able to move more of your money into super’s low-tax environment.
- The concessional cap is increasing from $27,500 to $30,000 a year.
- The non-concessional cap is increasing from $110,000 to $120,000 a year.
Time to tweak your salary sacrifice plan
If you’re a PAYG employee, your compulsory super guarantee (SG) payment will go up by half a percentage point to 11.5% from 1 July 2024.
While the higher concessional cap will allow you to sacrifice more salary into super, the increased SG rate will reduce some of your extra capacity. So, it could be a good time to review any existing salary sacrifice arrangements you have with your employer.
How to play catch up with your super
There are special rules that allow you to pay even more into your super – useful if you’re playing catch-up before retirement.
With concessional contributions if you have less than $500,000 in your super on 30 June of the previous financial year, you can carry forward unused amounts from up to five previous years. So, if you didn’t contribute the full amount in 2018-19, this is your last chance to use any unused amounts from that financial year – the opportunity will expire on 30 June 2024.
How to make large contributions to your super
With non-concessional contributions if you have less than $1.66m in your super on 30 June 2024, you can bring forward three years of contributions up to $360,000.
The rules can be a bit complex so if you come into a windfall from selling an asset or receiving an inheritance, it’s worth chatting to us about the best way to increase your retirement savings.
Tax cuts are coming in
The Government’s long-awaited ‘stage 3’ tax cuts are coming into effect on 1 July 2024. While there have been well-publicised changes – lower income earners will receive a higher cut than originally proposed, while higher income earners will receive a lower cut – the bottom line is that all personal income taxpayers will pay less tax.
Your tax cut from 1 July 2024
|
Taxable income |
Tax payable 2023/24 |
Tax payable 2024/25 |
Tax cut |
|
$40,000 |
$4,367 |
$3,713 |
$654 |
|
$60,000 |
$11,067 |
$9,888 |
$1,179 |
|
$80,000 |
$18,067 |
$16,388 |
$1,679 |
|
$100,000 |
$24,967 |
$22,788 |
$2,179 |
|
$120,000 |
$31,867 |
$29,188 |
$2,679 |
|
$140,000 |
$39,667 |
$35,938 |
$3,729 |
|
$150,000 |
$43,567 |
$39,838 |
$3,729 |
|
$160,000 |
$47,467 |
$43,738 |
$3,729 |
|
$180,000 |
$55,267 |
$51,538 |
$3,729 |
|
$190,000 |
$59,967 |
$55,438 |
$4,529 |
|
$200,000 |
$64,667 |
$60,138 |
$4,529 |
So, before 1 July 2024 when you’re still paying a higher rate of tax, you might like to think about bringing forward any tax deductions by:
- making personal deductible contributions to your super using any unused amounts from 2018/19
- prepaying any deductible expenses such as income protection premiums and investment loan interest where possible.
And then after 1 July 2024 you’ll be paying a lower rate of tax. So, you might like to think about deferring any income from:
- selling an asset that generates a capital gain
- receiving an employment termination payment or leave entitlement
- applying for a First Home Super Saver Scheme release
- making a taxable super withdrawal, such as total and permanent disability under age 60.
We can help
The good news is that if you’re a taxpayer you’ll have more disposable income that will help soften some of the cost-of-living pressures we’re facing.
So, if you’re lucky enough to have some spare funds, you might like to talk to us about ways to use the extra income, such as paying down non-deductible debt or boosting your super.
Current as at Apr 2024
Toowoomba Financial Centre Pty Ltd ABN 88073088070, trading as TFC Financial is a corporate authorised representative of Charter Financial Planning Limited ABN 35 002 976 294 Australian Financial Services Licensee License number 234665. If you no longer wish to receive direct marketing from us you may opt out by calling us on 07 4639 1399. This article contains general advice only. You need to consider with your financial planner, your investment objectives, financial situation and your particular needs prior to making any strategy or product decision.