This article points out rule changes and also key things for you to note based on changes in your own circumstances.
Concessional Contribution Cap
The concessional contribution cap will increase from $27,500 to $30,000 from 1 July 2024. Concessional contributions include employer contributions, salary sacrifice contributions and personal deductible contributions.
Minimum employer Super contribution rate increasing
Employers are required to make super contributions into each employee’s super account at the increased rate of 11.5% of an employee’s annual salary from 1 July 2024. Previously it was 11%.
Ceiling to employer contributions
For our high earning clients, you may not receive the full 11.5%. If you earn more than $62,270 per quarter or the equivalent of $249,080 per annum then your employer is not required to pay any additional superannuation on your base income.
Thus you could be earning $600,000 per annum but receive the same superannuation contribution as someone earning $249,080. (They will get taxed differently though, and I’ll explain below).
In the new financial year that contribution base will increase to $65,070 or the equivalent of $260,280 per annum. In this case given the 11.5% employer contribution this will be the equivalent of $29,932.20.
Excess concessional contributions
It is possible when you have multiple employers that you could receive more than the $30,000 in employer contributions in the 24/25 financial year.
In that case, any excess over $30,000 will be considered post-tax contributions. The excess concessional contributions will be included as part of your assessable income.
That access will be taxed at your marginal tax rate less a 15% tax offset to account for the contributions tax that was paid when it went into your super.
Income over $250,000 per year
This rule is not new, but if your income has increased and you earn more than $250,000 per annum in the financial year, please be aware of changes to expect.
You will receive a notice from the ATO informing you that you are required to pay additional tax. For Australian employees earning more than $250k, there is an additional 15% tax that will be due. This tax is called a Division 293 Tax.
You will have the option of paying the tax from your Super or from your own cashflow. If you seek advice about this tax, please speak with a financial adviser.
Can I avoid the Division 293 tax?
Unfortunately, there are no fancy ways we can avoid this tax. However, before you become a high-income earner, we encourage you to consider tax strategies with your accountant or financial advisor to manage future potential income.
Are you nearing age 67?
Keep in mind that after the age of 67, if you would like to make deductible contributions to Super, you will need to meet the work test (work at least 40 hours during a consecutive 30 day period). There is a work test exemption for those who are eligible.
Catch Up Contributions
From 1 July 2024 you will no longer be able to make catch up contributions dating back to the 18/19 financial year. These contributions can only be made until the 30 June 2024, if you are eligible. Please contact your financial adviser if you’d like to discuss.
Non concessional Contribution
The non concessional contributions, also considered post-tax contributions, will increase from $110,000 per financial year to $120,000.
The bring forward amount will also increase to $360,000. In this case, a contribution is made that precludes any further non concessional contributions for the next two financial years.
Warning about Non Concessional Contributions:
Keep the two following rules in mind. The first one is legislated and unlikely to change. The second one is not yet a legislated, but likely to be in place by 1 July 2025.
1. Access to Super
If you make contributions to super, keep in mind that you cannot access these funds until you meet a condition of release, that is generally (a) age 60 and retired from at least one position or (b) age 65 regardless of your working status.
2. $3m Super Rule
There is a proposed $3 million superannuation cap for superannuation. For individuals that have a super balance greater than this amount, they could be faced with tax on unrealised gains.
Conclusion:
If you are actively making non concessional contributions, pay attention to the projected balance as you near age 65. If it were to exceed $3m prior to reaching age 60, then you would have no way of releasing the funds out of the super environment and would be charged a tax on unrealised gains. If you would like to better understand your future financial position, please discuss with your financial advisor.
Tao Hsu
Senior Financial Advisor
