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

If you’re looking to maximise your superannuation, 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

For PAYG employees, the compulsory SG will go up by half of a percent to 11.5% from 1 July. While the annual concessional contribution cap will increase to $30,000, allowing more salary to be sacrificed into super, the increase in SG rate will reduce some of that additional capacity to salary sacrifice. So it is good time to review your existing salary sacrifice arrangement 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 higher annual cap means the total amount you can tip into super using the bring-forward rule has increased from $330,000 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 a financial adviser about the best way to increase your retirement savings.

...and tax cuts are coming in

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.

Your tax cut from 1 July 2024

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

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.

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.

If you’re lucky enough to have some spare funds, you might like to talk to a financial adviser about ways to utilise the additional disposable income, which may include paying down non-deductible debt and/or boost your super in terms of salary sacrificingbefore tax or after-tax contributions.

If you'd like to understand your super better, book in a chat with a super coach at no extra cost.