Regarding retirement planning in Australia, Self-Managed Superannuation Funds (SMSFs) have emerged as a favoured choice for Australians seeking personalised control and flexibility over their financial future. As we approach the threshold of 2024, a series of impactful updates and transformations await the domain of SMSFs. The new updates are to enhance the SMSF domain to equip Trustees with the tools they need to make well-informed decisions, all while harmonising with the dynamics of the regulatory framework.
Elevated Superannuation Guarantee Rate
Australia’s Superannuation Guarantee laws command that employers allocate 11% of their employees’ ordinary time earnings for the fiscal year 2023/24. However, to address concerns surrounding retirees leaning heavily on age pensions, legislative measures have been introduced to elevate the contribution percentage to 12% by 2025 gradually.
For enterprises of smaller scale with employees or qualified contractors, it’s imperative to promptly adjust their payroll and accounting systems to reflect the new 11% Super Guarantee (SG) rate for all salary and wage disbursements commencing from 1st July.
When calculating super contributions for eligible workers, employers must uphold the 11% contribution rate for all remuneration issued on or after the specified date.
Continuity of the Work Test
Individuals below 75 years of age can make or accept post-tax super contributions and salary-sacrificed contributions without the obligation of fulfilling work test prerequisites as long as their contributions align with current annual caps and maintain a balance below $1.9 million.
Nevertheless, if an individual plans to make a post-tax contribution for which they intend to claim a tax deduction (termed ‘personal concessional contribution’), they must meet the work test by engaging in gainful employment for a minimum of 40 hours within any 30-day period during the fiscal year in which the contributions are made.
Super Co-contribution Dynamics
The maximal co-contribution entitlement for the fiscal year 2023/24 remains at $500. The threshold for lower income (for full entitlement) increases to $43,445, while the threshold for higher income (eligibility cut-off) increases to $58,445.
Revised Minimum Pension Withdrawal
With effect from 1st July 2023, the 50% reduction in the minimum pension withdrawal rate is no longer applicable. As a result, while computing the minimum annual withdrawal on a pension balance for the fiscal year 2023-24, the 50% reduction shall not be considered.
As we step into the new period of SMSFs in 2024, strategic planning and adaptability will stand as pivotal forces to get the maximum benefits from these positive changes.
If you need assistance establishing SMSF, investment strategy planning and advice, investment implementation, or investment review and opportunities, then Smart Financial Advisory has you covered. Contact us today.