Advice Manager Iby Ibrahim reviews the significant changes to income tax, superannuation contribution rules and the Government Age Pension and what it can mean for you and your money.
Income tax cuts
On 1 July 2024 every employed Australian received a boost to their take home pay from the Federal Government’s legislated tax cuts. The ATO tax cut calculator is a quick and easy way to work out how much tax you will save.
How much extra income could you receive?
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These tax cuts are just like getting a pay rise, people end up with more take home pay, and the extra money may help ease cost of living pressures for many working Australians. But if you’re able to do so, contributing part of the extra income into super via salary sacrifice means you benefit not only by keeping some of those extra funds now, but you can also potentially benefit later from a boost to your retirement savings.
Retirees who are taxpayers in retirement because of income sources other than super, will pay less tax, but are likely to only see the benefit when they complete their tax returns for the year.
Superannuation
The Australian Superannuation Guarantee (SG), the compulsory amount of super contributions employers pay on behalf of their workers, increased half a percent to 11.5% on 1 July 2024. Next financial year the SG will reach its final legislated rate 12%.
Increase to before-tax contribution caps
From 1 July 2024, the concessional (before-tax) contribution cap increased to $30,000 a year, up from $27,500. Concessional contributions are part of the taxable component of your super, when the time comes to withdraw funds. These contributions for most people are taxed at only 15% at the time of contribution to super, instead of the usual marginal tax rate which could be as high as 45%, making super one of the most tax effective ways of investing your money.
Meanwhile under the carry forward provisions (which allow unused concessional caps from up to five previous financial years to still be used) unused cap amounts from the 2018-19 financial year expired on 30 June 2024. Unused cap amounts from the 2019-20 financial year will expire at the end of this financial year.
To be eligible to utilise any unused concessional contribution caps in the 2024/25 financial year, your total super balance needs to be less than $500K on 30 June 2024.
Changes to after-tax contribution caps
From 1 July 2024, the cap on non-concessional (after-tax) contributions increased to $120,000 a year, up from $110,000. Because tax has already been paid on non-concessional contributions, these funds are part of the tax-free component of your super.
The increase impacts the bring forward provisions for after-tax contributions, increasing the maximum to $360,000 depending on the total super balance at the end of the previous year (see table). If you are in an existing bring forward arrangement, you won’t benefit further from these changes.
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| After-tax contribution caps Bring forward provisions |
|||
|---|---|---|---|
| Total Super Balance* |
Age |
Bring Forward |
Cap |
| < $1.66 mil | 74 or under | 3 years | $360,000 |
| $1.66 mil to < $1.78 mil | 74 or under | 2 years | $240,000 |
| $1.78 mil to < $1.9 mil | 74 or under | No bring forward | $120,000 |
| $1.9 mil+ | (<75 ) 75 or under | Nil | Nil |
* Measured to 30 June the preceding financial year
Get in touch with your planner by calling 1300 192 602 to see how these changes could benefit you.
Changes to preservation age
From 1 July this year the preservation age for super, that’s the minimum age that people can start using their super, has been locked in at 60 years. Previously a person's preservation age ranged from age 55 to 60 years, depending on their date of birth. From this financial year, everyone including those between 55-60 years of age, now has a preservation age of 60 years.
Changes to accessing the Government Age Pension
Since 2017 the qualification age for the Government Age Pension has increased by six months every two years, reaching the final stage of the legislated change at 67 years on 1 January 2023.
Thanks to the changes in the marginal tax rates effective from 1 July this year, the income that retirees 67-years or over can earn before they pay any tax, has increased. Taking into account both the Low-Income Tax Offset and Seniors and Pensioners Tax Offset, a single person could now earn up to $35,813 before paying tax. Members of a couple could earn $31,888 each before paying tax .
Also changed from 1 July is an increase in the amount of income singles or couples can earn before it impacts their age pension entitlement.
The calculations around the income test including deeming can be complex. Your financial planner can work through these and other 1 July changes, to keep you on track to achieve your financial goals in retirement. Call to book your next appointment.
Disclaimer
This is general information only and does not take into account your specific objectives, financial situation or needs. Seek professional financial advice, consider your own circumstances and read our Financial Services Guide, any relevant product disclosure statement & Target Market Determination, before making a decision. Call us or visit our website for a copy.
Issued by Aware Financial Services Australia Limited (ABN 86 003 742 756, AFSL No. 238430), wholly owned by Aware Super (ABN 53 226 460 365) whose trustee is Aware Super Pty Ltd (ABN 11 118 202 672, AFSL 293340). For customer service please call 1800 620 305. Financial planning services are provided by Aware Financial Services Australia Limited, ABN 86 003 742 756, AFSL No. 238430. Estate planning services are provided by Aware Super Legal Pty Ltd (ACN 606 835 170), an Incorporated Legal Practice.