18 March 2023
Already rolling into March…2023 is flying by!
From a superannuation standpoint, following are just some of the changes you can expect this year:
Super guarantee increase
Employers face an increase to their SG liability this year. The rate of SG will increase from 10.5% to 11% from 1 July 2023, before gradually hitting 12% on 1 July 2027.
SG is payable on ordinary time earnings (which therefore excludes overtime payments) and may be payable to contractors as well as employees. A liability to a contractor will arise where the contract they work under is wholly or principally for their labour or skills.
The increased rate of 11% will need to be applied to any payments of ordinary time earnings made on and after 1 July 2023, even if some or all of the relevant pay period relates to work performed before 1 July.
A cap to end all caps
As was announced on 28 February by the current government, a cap on the amount you can have inside superannuation taxed at 15% (not just in a tax-free retirement account) may be imminent. At present, the amount of super on which earnings are taxed at just 15% is unlimited. The government has announced that this 15% rate of tax will be limited to $3 million. Earnings on amounts exceeding that, will be taxed at 30% from 1 July 2025, the government has announced. However, even if this cap finds its way into law, 99.5% of individuals will not be impacted as they hold less than $3 million in their super fund
An extra $200,000 into super this year
Although indexation has adversely contributed to the cost of living, it does have a superannuation upside!
The massive 7.8% inflation rate has triggered what’s called a double indexation in super – and means that the amount of money that can be put into tax-free super is going to turbocharge super contributions.
From July 1, the amount an individual can have in super where the earnings are tax-free when commencing retirement phase will jump from $1.7 million to $1.9 million. This is a significant change – the tax-free limit has only moved higher once since it was introduced in 2016 (moving by $100,000, from $1.6 million to $1.7 million). The $200,000 increase is a formality unless the government announces an indexation freeze in the upcoming May federal budget.
