It’s that time of the year again.
The end of the financial year is a great opportunity to review the financial plans and strategies you have in place for your clients.
And this is a pretty big year. There’s plenty of movement in the super and tax thresholds for 2023-24 that you need to be across to help amplify your clients’ potential.
While a lot’s happening on 1 July, one of the most significant changes is the increase in the general pension transfer balance cap, which opens up advice opportunities to maximise amounts in tax-exempt retirement phase pensions.
Alongside this, the increased total super balance thresholds create non-concessional contribution opportunities for your clients, with strategies spanning the current and new financial years…and beyond.
But while the numbers regularly change, one thing stays the same – the key tax-effective role that super can play in helping clients achieve their long-term financial goals.
Here’s a quick summary of eight ways you can help your clients make the most of the end of financial year.
1 Make the most of super contributions
- The annual concessional contributions cap remains at $27,500. (2022-23 and 2023-24)
- The work test for those aged 67 and over no longer applies to most voluntary contributions. Still required for those who want to claim a tax deduction for their contribution made after turning age 67.
- High income earners may be able to opt out of receiving super guarantee (SG) contributions from a second employer.
- Employers must use base salary to calculate SG – which rises to 11% from 1 July 2023.
- Age limit for spouse super contributions is 74 and count towards receiving spouse’s non-concessional cap.
- Clients can release more voluntary contributions under the First Home Super Saver Scheme – up to $50,000.
- Minimum age limit for downsizer contributions reduced to 55.
2 Look at ways to maximise personal super contributions
- Anyone below age 75 can make voluntary super contributions, including salary sacrifice or personal. Those aged over age 67 still need to meet the work test to claim the tax deduction for their personal contribution.
- Unused concessional contributions cap amounts from previous years can effectively increase the $27,500 cap (Catch-up CCs).
- Concessional contribution splitting with spouse can generate tax, super or Centrelink advantages.
3 Take advantage of more opportunities for non-concessional contributions as the total super balance (TSB) thresholds increase by $200,000.
| Total Super Balance (TSB) (at 30 June 2022) | Total Super Balance (TSB) (at 30 June 2023) | Available NCCs cap in 2022-23 and 2023-24 | Bring-forward period |
| < $1.48 million | < $1.68 million | $330,000 | 3 years |
| $1.48 - < $1.59 million | $1.68 - < $1.79 million | $220,000 | 2 years |
| $1.59 million - < $1.7 million | $1.79 million - < $1.9 million | $110,000 | Standard NCCs cap only |
| ≥ $1.7 million | ≥ $1.9 million | NIL | N/A |
You may consider whether to trigger a bring-forward now for eligible clients or just do the standard NCCs cap only and do the bring-forward next year. Some clients who are currently ineligible to make NCCs may find new opportunities after 1 July 2023 due to indexation of these caps.
4 Focus on super retirement income streams
- Clients may be able to take advantage of increased lifetime limits and move more from accumulation to pension phase… consider the timing of commencement of new or additional pensions before or after 1 July 2023.
- …but watch out for minimum required income payments.
5 Review clients’ transition to retirement (TTR) income streams – is your client going to meet a retirement condition of release before 1 July 2023? Consider whether the TTR income stream should convert to ‘retirement phase’ or be moved back to accumulation phase so your client can maximise pension cap indexation opportunities.
6 Take advantage of opportunities to manage personal tax in key areas.
- Managing redundancy payments and timing to optimise tax outcomes where possible.
- Managing capital gains tax by selling underperforming assets to offset any realised gains.
- Prepaying deductible expenses to manage taxable income.
- Managing ‘lumpy’ income that pushes clients into higher tax brackets.
7 Optimise the increased withdrawal amount for the First Home Super Saver Scheme from $30,000 to $50,000. Interested clients should aim to target the maximum $15,000 per year of voluntary withdrawable contributions to maximise the opportunity as soon as possible.
8 Make the most of social security opportunities when gifting to family members.
What’s changing on 1 July 2023…and what isn’t
Here’s a quick reminder of the numbers that matter.
2023-24 super and tax thresholds
| Threshold | Existing 2022-23 ($) | New 2023-24 ($) |
| Standard concessional contribution cap | 27,500 (No change) | |
Non-concessional contribution cap
|
110,0001 330,0001,2 (No change) |
|
Co-contribution (per annum)
|
42,016 57,016 |
43,445 58,445 |
Spouse tax offset
|
37,000 40,000 (No change) |
|
| Super guarantee percentage | 10.5% | 11% |
| Superannuation Guarantee (SG) maximum contribution base (per quarter) | 60,220 | 62,270 |
| CGT cap amount (lifetime limit) | 1,650,000 | 1,705,000 |
| Division 293 tax – High income threshold | 250,000 (No change) | |
| General Transfer Balance Cap amount | 1,700,000 | 1,900,000 |
| Defined benefit income cap3 | 106,250 | 118,750 |
| Untaxed plan cap amount4 | 1,650,000 | 1,705,000 |
| Low rate cap amount5 | 230,000 | 235,000 |
Tax-free part of genuine redundancy and early retirement scheme payments (per payment)
|
11,591 5,797 |
11,985 5,994 |
| Employment termination payment cap (per annum) | 230,000 | 235,000 |
| Minimum annual payments for super income streams6 | ||
| Under age 65 | 2% | 4% |
| Age 65 – 74 | 2.5% | 5% |
| Age 75 – 79 | 3% | 6% |
| Age 80 – 84 | 3.5% | 7% |
| Age 85 – 89 | 4.5% | 9% |
| Age 90 – 94 | 5.5% | 11% |
| Age 95+ | 7% | 14% |
| Preservation age | ||
| Date of birth | Preservation age | Reaches preservation age |
| Before 1 July 1960 | 55 | Already reached preservation age |
| 1 July 1960 – 30 June 1961 | 56 | |
| 1 July 1961 – 30 June 1962 | 57 | |
| 1 July 1962 – 30 June 1963 | 58 | |
| 1 July 1963 – 30 June 1964 | 59 | From 1 July 2022 to 30 June 2023 |
| From 1 July 1964 | 60 | From 1 July 2024 |
|
||
1 No NCC cap when total super balance is $1.9 million or more on prior 30 June. 2 Subject to total super balance on prior 30 June, as per table above. 3 Limits the amount of concessionally taxed income from capped defined benefit income streams. 4 Applies to taxable component of untaxed super fund benefits. 5 Applies to taxable component of taxed super fund benefits for members who have reached preservation age and are below age 60. 6 In response to the COVID-19 pandemic, the Government halved the minimum annual drawdown requirement for the 2019-20 to 2022-23 financial years. At the time of publication, there is no indication that the reduction will extend beyond the 2022-23 financial year. |
We’re here to help
It’s important to be across the changes to maximise opportunities for your clients and help them create their tomorrow. But we know it can be complex. So our expert TapIn team are on hand to walk you through some key strategies.
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What you need to know
The information on this page has been provided by NMMT Limited ABN 42 058 835 573, AFSL 234653 (NMMT). It’s for professional adviser use and is facutal information only.
North is a trademark registered to NMMT.
Any general tax information provided is intended as a guide only and not to be relied upon. Refer to a registered tax professional before making decisions.