A quick adviser primer on super and tax changes

What’s changing on 1 July 2024, what’s not and what you need to know to help your clients.

With super caps going up and tax cuts coming in, there are some big changes on 1 July 2024 that you need to be across to help your clients get on the front foot as the financial year draws to a close.

Super caps are going up

If your clients have any spare funds, they’ll be able to move more of their 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.

Helping clients play catch up with their super

The big opportunity not to miss out on is carry-forward amounts for 2018-19.

With concessional contributions if your clients have less than $500,000 in their super on 30 June of the previous financial year, they can carry forward unused amounts from up to five previous years. So, if they didn’t contribute the full amount in 2018-19, this is their last chance to use any unused amounts from that financial year – the opportunity will expire on 30 June 2024.

Time to tweak salary sacrifice strategies

Compulsory SG payments for PAYG clients will go up by half a percentage point to 11.5% from 1 July 2024.

Of course, while the higher concessional cap will allow them to sacrifice more salary into super, the increased SG rate will reduce some of their extra capacity. So, it could be a good time to review any existing salary sacrifice arrangements they have with their employer.

Helping clients build up their retirement savings

If your clients have less than $1.66m in their super on 30 June 2024, they can bring forward three years of non-concessional contributions up to $360,000.

If you have HNW clients with a bit more saved up, don’t forget that will affect how much they can tip into their super.
 

The total superannuation balance (TSB) determines your client’s ability to contribute to super and is measured at 30 June of the previous financial year.

TSB is made up of super accumulation plus retirement phase pensions plus rollovers plus TTR pensions, less any personal injury contributions.

There are plenty of useful resources out there to help determine your client’s TSB, including the ATO portal/myGov account screenshots, super fund statements and tax returns.

And for any clients running a small business and looking to retire, sell the business and make super contributions, the CGT lifetime cap is increasing from $1.705m to $1.78m.

…and what’s not changing

OK….so those are the big super changes covered. It’s also worth reminding yourself of what’s not changing.

• The general transfer balance cap is still $1.9 million
• The defined benefit income cap is still $118,750 p.a
• The NCC eligibility threshold is still $1.9 million
• The recent retiree work test exemption TSB threshold is still $300,000 (TSB on 30 June prior)
• The carry-forward concessional contribution TSB threshold is still $500,000 (TSB on 30 June prior)
• The small business CGT retirement exemption cap is still $500,000
• The spouse contribution and government co-contribution TSB threshold is still 1.9 million

Clients turning 60 next year? Here’s what they need to know

Any clients born after 1 July 1964 and turning 60 in the 2024/25 financial year will be able to access their super for the first time as they hit the long-awaited preservation age.

• They’ll be able to withdraw larger lump sums if they're retired without worrying about the low-rate cap of $235,000.
• They’ll enjoy tax-free pension income payments, regardless of whether they have a transition to retirement (TTR) or retirement income stream.

If an individual is still working, they won't have full access to their super until they reach 65. However, they can start accessing their super with a TTR strategy, which allows them to draw regular income up to 10% but doesn’t allow lump sum withdrawals.

When you should talk to your clients

Regular client reviews are essential. But it’s a good idea to schedule a client review when:

• they’re turning 60, 67 or 75
• they’re planning to sell an asset
• they’re HNW
• they have a TTR pension
• they’re retiring and can meet a condition of release
• they have salary sacrifice arrangements.

Tax cuts are coming in

The Government’s long-awaited ‘stage 3’ tax cuts are coming into effect on 1 July 2024 – and despite all the noise, the good news is all personal income taxpayers will pay less tax.

_{Source: https://treasury.gov.au/tax-cuts/calculator}

Before 1 July 2024 your clients may still paying a higher rate of tax. So they might like to think about bringing forward any tax deductions by:

• making personal deductible contributions to their 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 they may be paying a lower rate of tax. So they might like to think about deferring any taxable 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.