Superannuation rule changes 1 July 2024

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 654.00%
65 to 745.00%
75 to 796.00%
80 to 847.00%
85 to 899.00%
90 to 9411.00%
95 or over14.00%

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?