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How the new financial year will affect your superannuation and what you should do

Super changes will deliver opportunities this financial year.

Super changes will deliver opportunities this financial year. Photo:Getty

As the calendar rolls on with relentless certainty we have now moved into financial year 2024-25 and that will have a significant effect on superannuation.

The first thing you will notice when you see your payslip with superannuation contributions included is that the amount of super you are being paid has increased.

The superannuation guarantee (SG) rate your boss has to squirrel away in your super account has gone up to 11.5 per cent from 11 per cent.

The last stage on the government’s ultimate target of 12 per cent, which will be reached on July 1, 2025.

Check, please

Currently employers have to make the payment quarterly so don’t forget to look for it and make sure you are actually getting the rise.

Underpayment of super is costing 2.8 million Australian workers $4.7 billion a year or an average of $1700 annually.

Make sure you’re not missing out on the increase and contact the boss if it looks like you are.

Concessional contributions

Along with the SG, the amount of money you can put in super has increased.

Concessional contributions caps are being increased from the current $27,500 a year to $30,000 from July 1,” says Toby Perkins, a financial planner with industry fund NGS Super.

That means anyone who has some extra cash they wish to contribute to super can contribute up to the new limit in one year.

If the money you contribute this way is from wages or profits, you will have the benefit of a concessional 15 per cent tax rate rather than the higher amount you pay on income.

Wayne Leggett, director of Paramount Financial Solutions, says the increase in concessional caps gives more headroom for those with the ability to use up unused caps for the past five years in a lump sum contribution.

 

Notionally if you have made no concessional contributions for the past five years and had under $500,000 in your account on June 30  you could contribute up to $137,500 during the next financial year.

But before you do that remember to check what you have actually  contributed in the past or you could get hit with a tax bill for overpayment.

A great place to do this is through the ATO online portal accessed through the MyGov website.

“You can log in and see what contributions you have made this year and in all previous years,” Perkins said.

It doesn’t matter how many super funds you have been in, all that information will be collected by the ATO and shown here. It’s a great resource to use to keep up to date with your super situation.

Salary sacrifice

Concessional contributions can be paid into super at the discretion of the super fund member over the year.

That can work for some people but for others the discipline of salary sacrifice arrangements are preferable.

With these you make an arrangement with the boss to make regular contributions for you above the SG level.

“Given there are personal tax cuts [and increased contribution caps] you could do a bit extra on salary sacrifice,” Perkins said.

The tax cuts from July 1 will deliver an extra $354 a year to someone on $30,000, $1179 to someone on $60,000 and $2679 for someone on $120,000.

The tax cuts kick in on July 1, so if you want to invest some of that extra income into salary sacrifice contact your boss as soon as possible.

“For people working full time or even part time, salary sacrifice offers a really good tax savings even if we’re only talking contributions of $50 a week,” Perkins said.

Non-concessional contributions

These are mechanisms used to get large amounts of money into super for those who have sold an asset or received a windfall of some sort.

Such contributions are made to your fund without a tax concession because the ATO considers them made with money on which tax has already been paid.

 

From July the maximum non-concessional contribution will increase from $110,000 to $120,000 annually or up to $360,000 grossed up and paid ahead for three years.

These contributions can’t be made once your balance hits $1.9 million, so are available for the vast majority of people.

Transfer balance cap

This is the amount of money you can transfer into a pension account when you start to draw on super.

Currently it is $1.9 million and this figure will not increase from July 1.

If you retire with more than this you will have to withdraw the extra from super or keep it in an accumulation account where its earnings will be taxed at 15 per cent.

For pension mode balances there are no taxes.

Pension refresh

“At this time of year, we do a lot of pension ‘refreshes’ for clients,” Leggett said.

That means looking at the amount retirees are drawing from their pension and increasing or decreasing that depending on their situation.

If you are retired but working a little you might want to increase super contributions or move money you have built up in the accumulation account you pay contributions into to your pension account, where it isn’t taxed.

But remember regardless of need, the ATO demands you take set amounts from your pension fund every year depending on age.

For example, from 67 you must withdraw 5 per cent of a pension fund annually.

Review insurance

David Simon from Integral Private Wealth, says the new financial year is a good time to check in with the insurance offered by your super fund.

Have a refresher to see how your insurance is set and whether you need to update.

Check if your policy needs to change with your circumstances.

For example, if you’ve had a child, your list of beneficiaries might be in need of an update.

“If you’ve recently paid off your mortgage, seen your income change, or your children are now financially independent and have moved out of the family home, you might decide to change the level of cover you have,” Simon said.

The New Daily is owned by Industry Super Holdings

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