Knowing which changes will occur on July 1 2023 is mandatory for those both in retirement or planning to be in the near future. Changes are coming to eligibility age for the Age Pension, income and asset thresholds for those on a full Age Pension and some superannuation rules. It’s important to check which changes could have an impact on your income. Here’s a handy summary which gives you time to adjust your planning if need be.
Age Pension age increases to 67
Australian Age Pension eligibility depends upon many factors. The major ones being your age, your residency status and your ability to pass a means test based upon income and assets.
In 2013, the Labor Government introduced measures in 2009 to increase the pension age to 67. This has occurred through gradual increases during the period July 2017 to July 2023.
This is the last (currently legislated) increase in Age Pension age.
Income and Asset thresholds will change
Whilst the income and asset thresholds for those on a part-Age Pension changed on 20 March, in line with indexation. Thresholds for those on a full pension are scheduled to change on 1 July.
Increase in Transfer Balance Cap
As a result of indexation, the general Transfer Balance Cap of $1.7 million will increase to $1.9 million on 1 July this year. Transfer Balance Caps (TBCs) are caps or limits to the amount that you can transfer from an accumulation fund into an Account Based Pension. Whilst the tax on the earnings on your super in the accumulation phase is 15%, the tax on earnings in Account Based Pensions is nil. Many retirees transfer as much as allowable into a retirement pension where the earnings aren’t taxed.
***Money smart tip
If you are already in decumulation, the full amount of the TBC will not apply, but a proportion might – as always, it’s best to seek advice on your particular circumstances.
SG moves from 10.5 -11%
In line with legislation, the Superannuation Guarantee (SG) will increase from the current level of 10.5% to 11% on 1 July this year. The superannuation guarantee (SG) is a mandatory requirement whereby a percentage of your earnings is paid into your super fund by your employer. The SG rate will continue to rise by 0.5% per year till it reaches 12% in July 2025. Currently this amount needs to be paid quarterly. This will change to ‘payday’ contributions from July 2026.
If you are still working and SG contributions are made into your super fund, it’s worth checking if the SG is part of your salary package. If this is the case, you might actually receive less income as the extra 0.5% will come from your whole package, and not your employer.
And one more thing:
Deeming rates would normally be reviewed on 1 July each year. This year there will be no change as they are frozen until 30 June 2024.
Do you need more information?
You can check the Retirement Essentials Age Pension Entitlements Calculator for free here.
Or you may have some more specific questions that you want help with to determine how an alternative strategy could affect your financial position and your ability to achieve your goals. Retirement Essentials offers adviser-led strategy consultations on a range of topics. In these meetings you are able to join one of our financial advisers online where they assess your current situation and show you what an alternative option may look like. Click on one of the links below to book a strategy consultation.
- Retirement Forecasting (understanding spending options during your retirement journey, followed up with a tailored strategy paper).
- Understanding more about super (there are many options available to maximise income or wellbeing).
- Maximising your entitlements (making the most of your financial resources and Centrelink)
- Understand impacts of your home mortgage (consider your retirement journey options)
- Younger Spouse strategy (How moving assets to a younger spouse’s super can increase your entitlements)