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  • Cameron Finlay

Six Changes To Super And Pensions


Personal wealth has improved, but you must also allow for the effect of inflation. Since March 2020, average wealth per capita increased 19%, but adjust for inflation and it’s only 8%. The government has allowed for inflation and passed indexing changes to pensions and superannuation, of benefit mainly to middle-income retirees and older Australians, and worth knowing.


1. Pension Access has Improved


The Assets Test may allow access to a full or part pension. Single homeowners can have $301,750 in assets, and non-homeowners can have $543,000 before their full pension payment is reduced. Homeowner couples' asset threshold increases to $451,500 and non-homeowners' increase to $693,500 before the full pension is affected. (Every $1,000 in assets over the assets-free amount reduces the pension rate by $3 per fortnight).


2. Even if you have 'a lot' in Super, more may be possible


The tax-free super cap last year was $1.7m, now increased to $1.9m. (Simply means there is no tax on the Fund paying a pension on a balance up to $1.9m, and the pension is also tax-free to the recipient. Above that, the tax rate is 15%).


3. Pension Drawdowns from Super are back to Normal


Since 2020, those taking Pensions from Super were only required to draw 50% of the ATO set drawdown percentage. If you take a pension, the ATO rules that from 1 July 2023, you must take 4% of the member balance if aged 65 to 74, and this increases by increments to age 95. (However, you may be able to draw and re-contribute to Super, but not if over 75).


4. Increases in Employer Compulsory Contributions


From 1 July 2023, the Super Guarantee Charge paid by employers increases to 11%. (Note: – Super can apply to personal ABN contractors, Directors, all casuals, etc. And, if super is paid late it is not tax deductible for the employer).


5. Younger Workers and Super


Inflation is applied to the contribution caps, not to Wages or CPI. That means if you want to contribute more to super, either to save tax or to increase savings, you will have to make personal contributions in addition to the employer SGC. (The maximum deductible contribution is now $27,000 – so reduce this by the employer contribution to calculate the allowable personal contribution for the year. You may also be able to make tax-deductible Catch-up contributions where the super balance is under $500,000).


6. Over $3m in Super?


From July 2025 there is a new tax rate on amounts over $3m in super. Based on the current caps of $1.9m, a pension is tax-free, above $1.9m, the tax is 15% on earnings above this, and then above $3m, the tax rate will be 30%. On amounts up to $3m the tax applies to income earned, above that, the tax applies to unrealised gains. Tax will be paid on growth in value each year, and it seems no benefit for a reduction in value. (This could be an issue for investors with property, or high-growth shares – certainly worth thinking about now).



Superannuation and Pensions are fiddled with by every Government. In the good old days, just about anything was possible, now the industry is very regulated. These changes need to be considered by everyone with super so you can save tax, increase your wealth, retire early, or better understand what may be possible with good planning.


Happy to help if you need to review one of these, or direct you to experienced planners who understand super, pensions, aged care, and tax.



 
Cam Finlay (Arnold & Finlay Accountants & Planners Pty Ltd)


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