When it comes to retirement, forewarned is forearmed. This is definitely the case as we approach the End of Financial Year (EOFY) when many rules will change. Today we are sharing updates on five different super rules that may affect your own financial planning. We also share the minimum withdrawals you will have needed to make before 30 June 2024.
Super Guarantee
This is the mandatory amount your employer must put into your nominated super fund. On 1 July 2024 it will increase from 11% of your salary to 11.5%. If you are still working and making additional concessional or non-concessional contributions to your super, it is worthwhile bearing this amount in mind so that you do not go above any relevant caps through extra contributions.
Concessional contributions
These are pre-tax contributions. The concessional contribution cap is indexed based upon the average weekly ordinary times earnings or AWOTE. As wages have increased over recent months, so too has the concessional contributions cap which will move from the current amount of $27,500 to $30,000 on 1 July this year. You may be aware that your concessional cap also affects amounts you can contribute using the ‘carry-forward’ rules. Bear in mind, also, that these are five-year rules, so if you have unused concessional contribution caps from Financial Year 2018-19 then this is the last year that these can be used.
Non-concessional super contributions
Whether working or not, anyone under the age of 75 can make after-tax contributions to their super, as long as the total balance after the contribution remains below the Total Super Balance (TSB). The TSB is currently set at $1.9 million. This will not change on 1 July. Because non-concessional caps are calculated at four times the concessional amount ($30,000 from 1 July), the new cap will be $120,000 (up from $110,000) as of 1 July. This amount, in turn, has an effect on the bring forward limits starting on 1 July (two years, $240,000 and three years $360,000).
Bring forward or carry forward?
If you find these limits confusing, you’re not alone! Carry forward limits are available to those making pre-tax or concessional contributions. Bring forward limits apply to contributions made post-tax, i.e. they are non-concessional.
Transfer balance cap
This refers to the limit on the total amount of superannuation that can be transferred into the retirement phase. Most Australians change their super into retirement phase by starting an Account-Based Pension (ABP). You can make transfers into the retirement phase such as an ABP up to the transfer balance cap, currently a maximum of $1.9 million. It’s worth remembering that all your super account balances in the retirement phase are added up to calculate this amount.
There was some conjecture that this cap would increase to $2 million this year, due to CPI indexation, but CPI has remained sufficiently low to prevent such an increase. Exceeding the transfer balance cap may mean you have to take the excess in a lump sum, transfer it back to accumulation phase or pay extra in tax. Best to be aware of the limits before you do this – don’t put yourself in this position.
Minimum withdrawals
Are you up to date?
You may recall that the temporary minimum rate for pension withdrawals was halved during the Covid pandemic. This reduced rate went back to the normal amount, as listed in the table below, from 1 July 2023. It is worth checking that you have complied with this amount before the end of the financial year. If you do not need this full amount of money for your normal living expenses (i.e. the rate is too high), you may be able to recontribute to your super or talk to an adviser about how to use another strategy which maximises your overall financial position.
| Age | Standard minimum drawdown rate 1 July 2023 onwards |
| Under 65 | 4.00% |
| 65 to 74 | 5.00% |
| 75 to 79 | 6.00% |
| 80 to 84 | 7.00% |
| 85 to 89 | 9.00% |
| 90 to 94 | 11.00% |
| 95 or over | 14.00% |
Hopefully this brief overview of the different ways of moving money into and out of super has been helpful. It’s not easy understanding every single rule, nor the implications of choosing one course of action over another. If you would like to better understand your own saving and superannuation options, an Understanding more about super consultation can help you to assess all available options to help make your super work better for your retirement needs.
Similarly, using the Retirement Spending Simulator allows you to see the trajectory of your super savings and any eventual Age Pension payments so that you can make decisions based upon a clear understanding of your likely retirement ‘salary’.
Do the rules change too frequently?
Most of the above changes will result in more favourable limits and benefit many retirees. But maybe too many changes are wearing you down?
if on age pension ,how much can you draw from super income stream and still get full pension .just as an example say you have 60000 in super and you draw 10% per year for 10 years .
Hi Eric, Centrelink assess superannuation income streams as assets and use the total balance, similar to how a bank account is assessed. The amount you drawn down is not assessed as income or in any other way so you can comfortably drawdown whatever you wish.
My experience is if you are working and have minimal assets then centerlink can assess you on Income. Receiving an income stream I think can be counted. Once fully retired the assets would probably be greater than income so it may not be counted. Not sure if right as have just started to receive age part pension and centerlink were keen to know how much income stream I received. Actually it is less than salary sacrifice so didn’t see why they would count it.
Hi Lynette, thank you for keeping me honest! I can confirm that income streams set up via Super (aka account based pensions) are assessable as assets. Defined benefits are assessable as income and some annuities can be assessed as income but when you simply transition from accumulation to pension phase, those are viewed as assets.
Minimum withdrawals- from where? From the Super or from the ABP account?
Do I have to move all my Super to ABP or I can only open this ABP with part of Super & keep the rest in a Supper account. ? Thanks
Hi Elizabeth, as per the article, if you are unsure how superannuation could work better for you and want to learn more it would be best to book a consultation with our specialists HERE.
I have a small amount (less than $100,000) in super and haven’t made a withdrawal since November 2022. I don’t have an ABP. am I required to withdraw? We are full age pension recipients.
Hi Robyn my understanding is that while your super remains in an accumulation account there are no conditions to compulsorily withdraw monies. The rules change if you convert any or all of the monies into an account based pension account as then, depending on your age, you are required to withdraw a minimum amount; e.g. if you are aged 65 to 74 then you must draw down 5%
When my super balance increased (due to rising stock market), Centrelink noticed this and reduced my part pension. If I spend money on house renovations and reduce my super balance, will Centrelink automatically increase my pension, or do I have to notify them?
Hi John, Centrelink receive updates from your superfund in March and September of each year and will automatically update your pension off the back of those updates. If you have other significant changes in between that period you would need to notify Centrelink yourself for a recalculation of your pension to occur.
On a question regarding the process of Recontribution to lessen the taxable component.
My current income stream balance is $675k and proportion is 63% taxable and 37% tax free
I’m 72 this year
My wife (70 this year) is yet to convert to an income stream (balance $490k) with approximately 50/50 split.
Should we wait until the new fin. year to consider this recontribution and would any limits change?
Hi Neil, it would be best to book a consultation with one of our specialists (HERE) to discuss the pros/cons.
I’m about to retire in 6 weeks. How much can I have in the bank and in super without it affecting my pension. I’m single, own my own house, my car is worth about $35,000 and I have no investments or other properties.
Hi Christine, we have a page no our website that explains the thresholds HERE.
I have an income stream and was wondering if I can pay a lump sum (under $15k) into it or would I be better paying it into my super account.
Or would a Term Deposit be the way to go.- I don’t work.
Hi Billy, our advisers would be happy to go over the pros/cons of each of the options you are considering so that you can make the best decision for you. CLICK HERE to make a booking.
Has a enduring power of attorney the power to withdraw from a super account and place it into a bank account Pryor to the person passing to avoid paying tax under the instructions of the person passing
The Discrimination Death Tax only applies if you are unable to marry or unable to breed. It is a blatant discrimination. Even if you bequeath everything you own to CHARITY, they still take 15-17% tax off the amount before it goes to a charity. If you are able to choose to marry, you can do income /super splitting to reduce your overall tax and even leave your entire super to your spouse, tax free. Your spouse does not even have to be financially dependent on you. How this is not a gross breach of discrimination laws is bizarre.
Can my SMSF lend money to my accountant, or is that not “arms length”?
Hi Pigeon, thanks for your question. This can be a very tricky area. The ATO view is “Loans made by your SMSF must be in the best interests of members and comply with your investment strategy.”
There can be a lot of complications with some strict rules and regulations, and we strongly recommend you seek specialist tax advice on this to avoid the risk of your fund becoming non-compliant. This is beyond the type of advice our organisation provides.