Self-Managed Superannuation Funds (SMSFs) continue to be a popular choice for Australians seeking greater control and flexibility over their retirement savings. As we approach the year 2024, there are several significant updates and changes in store for SMSFs. These updates aim to improve the SMSF landscape, ensuring that Trustees can make well-informed decisions while adhering to the evolving regulatory framework.
Under Australia’s Superannuation Guarantee laws, employers are obligated to contribute 11% of their employees’ ordinary time earnings for the financial year 2023/24. However, recognizing concerns that this level of contribution may still result in retirees heavily relying on the age pension, the Parliament has enacted legislation to incrementally increase the percentage to 12% by the year 2025.
For small businesses with employees or eligible contractors, it is essential to ensure that their payroll and accounting systems are promptly updated to reflect the new Super Guarantee (SG) rate of 11% for all salary and wage payments made from 1 July.
To calculate super contributions for eligible workers, employers need to adhere to the 11% contribution rate for all payments of salary and wages made from the specified date.
Individuals under 75 years of age can make or receive after-tax super contributions and salary-sacrificed contributions without meeting the work test requirements, as long as they stay within the current annual contribution caps and maintain a balance of less than $1.9 million.
However, if an individual intends to make an after-tax contribution for which they plan to claim a tax deduction (referred to as a ‘personal concessional contribution‘), they must satisfy the work test requirements by being gainfully employed for 40 hours or more in any 30-day period within the financial year in which the contributions are made.
The maximum co-contribution entitlement for the 2023/24 year remains at $500. The lower income threshold (for full entitlement) increases to $43,445 and the higher income threshold (cut-off for eligibility) increases to $58,445.
Starting from the 1st of July 2023, the 50% reduction in the minimum pension drawdown rate will no longer apply. Consequently, when calculating the minimum annual payment on a pension balance for the 2023-24 financial year, the 50% reduction will not be taken into consideration.
By embracing these updates and making well-informed decisions, Trustees can continue to harness the potential of SMSFs, securing a brighter and more prosperous future for their retirement savings. As we move into the new era of SMSFs in 2024, careful planning and adaptability will be key to reaping the benefits of these positive changes.
If you would like to know more about Trustees’ responsibilities and how to manage your SMSF, you can find a comprehensive SMSF Guide here.
