How to boost your retirement savings as super and tax laws change

If you’re looking to maximise your superannuation in the lead-up to retirement, it’s a good idea to be up to speed on any legal updates that could affect the super and tax landscape.

With super caps going up and tax cuts coming in, there are some big changes on 1 July 2024 that could help you boost your retirement savings.

Here’s how it’s all going to work.

Super caps are going up

There are annual caps – or limits – on how much money you can contribute towards super, both in terms of pre-tax ‘concessional’ contributions and after-tax ‘non-concessional’ contributions.

Both these caps are going up, so if you have any spare funds you’ll be able to move more of your money into super’s low-tax environment.

• The concessional cap is increasing from $27,500 to $30,000 a year.

• The non-concessional cap is increasing from $110,000 to $120,000 a year.

Time to tweak your salary sacrifice plan

If you’re a PAYG employee, your compulsory super guarantee (SG) payment will go up by half a percentage point to 11.5% from 1 July 2024.

While the higher concessional cap will allow you to sacrifice more salary into super, the increased SG rate will reduce some of your extra capacity. So, it could be a good time to review any existing salary sacrifice arrangements you have with your employer.

How to play catch up with your super

There are special rules that allow you to pay even more into your super – useful if you’re playing catch-up before retirement.

With concessional contributions if you have less than $500,000 in your super on 30 June of the previous financial year, you can carry forward unused amounts from up to five previous years. So, if you didn’t contribute the full amount in 2018-19, this is your last chance to use any unused amounts from that financial year – the opportunity will expire on 30 June 2024.

How to make large contributions to your super

With non-concessional contributions if you have less than $1.66m in your super on 30 June 2024, you can bring forward three years of contributions up to $360,000.

The rules can be a bit complex so if you come into a windfall from selling an asset or receiving an inheritance, it's worth chatting to us about the best way to increase your retirement savings.

Tax cuts are coming in

Taxable income	Tax payable 2023/24	Tax payable 2024/25	Tax cut
$40,000	$4,367	$3,713	$654
$60,000	$11,067	$9,888	$1,179
$80,000	$18,067	$16,388	$1,679
$100,000	$24,967	$22,788	$2,179
$120,000	$31,867	$29,188	$2,679
$140,000	$39,667	$35,938	$3,729
$150,000	$43,567	$39,838	$3,729
$160,000	$47,467	$43,738	$3,729
$180,000	$55,267	$51,538	$3,729
$190,000	$59,967	$55,438	$4,529
$200,000	$64,667	$60,138	$4,529

Source: https://treasury.gov.au/tax-cuts/calculator

The Government’s long-awaited ‘stage 3’ tax cuts are coming into effect on 1 July 2024. While there have been well-publicised changes – lower income earners will receive a higher cut than originally proposed, while higher income earners will receive a lower cut – the bottom line is that all personal income taxpayers will pay less tax.

So, before 1 July 2024 when you’re still paying a higher rate of tax, you might like to think about bringing forward any tax deductions by:

• making personal deductible contributions to your super using any unused amounts from 2018/19

• prepaying any deductible expenses such as income protection premiums and investment loan interest where possible.

And then after 1 July 2024 you’ll be paying a lower rate of tax. So, you might like to think about deferring any income from:

• selling an asset that generates a capital gain

• receiving an employment termination payment or leave entitlement

• applying for a First Home Super Saver Scheme release

• making a taxable super withdrawal, such as total and permanent disability under age 60.

We can help

The good news is that if you’re a taxpayer you’ll have more disposable income that will help soften some of the cost-of-living pressures we’re facing.

So, if you’re lucky enough to have some spare funds, you might like to talk to us about ways to use the extra income, such as paying down non-deductible debt or boosting your super.

DISCLAIMER

Any advice contained in this blog post is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Before making any decision, you should consider the appropriateness of the advice with regard to those matters.  Ask us for more details.

Current as at Apr-24