Australian Ethical Super and Pension, June 2023

Federal Budget

The 2023/24 Federal Budget has confirmed or announced several key points that impact superannuation. We’ve sought to briefly summarise the relevant impacts below.

Increase to the Concessional Tax on Accounts Above $3 Million 

The Government has confirmed its intention to increase the concessional tax applied to future earnings on total superannuation balances that exceed $3 million. This reform intends to increase the tax rate for earnings on balances above $3 million to 30%. Any earnings related to an individual’s balance below the $3 million threshold will remain at 15%. 

Subject to the passage of legislation, this change is intended to apply from 1 July 2025. You can read more about this increase here. 

Increased Payment Frequency for Superannuation Guarantee Contributions 

The Government has also confirmed that, from 1 July 2026, it will seek to amend the payment frequency of Superannuation Guarantee (SG) contributions by requiring employers to pay SG contributions at the same time that they pay their employee’s salary or wages. This will increase the minimum frequency for the payment of SG contributions from the existing quarterly requirement and will allow employees to have better visibility over their SG contributions. Receiving contributions earlier will also see contributions invested for a longer period giving a greater potential for compounding returns.  

Other Impacts on Superannuation 

The Government also announced that it will: 

• provide funding to enable the ATO to engage more effectively with businesses to address under or unpaid super; and 

• provide $5 million over 5 years to continue the operation of a superannuation consumer advocate, which aims to improve member outcomes. 

Further detail on these changes can be found here.  

Further reduction in the eligibility age to make a downsizer contribution 

From 1 January 2023, eligible individuals aged 55 years or older can now choose to make a downsizer contribution into their super fund of up to $300,000 per person or $600,000 per couple from the proceeds of selling their home. Prior to this, the eligibility age was 60 years or older.  

All other eligibility rules remain unchanged. We recommend that you visit the Australian Taxation Office’s website for more information and speak to a financial or tax adviser before making an investment decision. 

New rates and thresholds 

The temporary reduction in minimum annual drawdown rates has not been renewed this year, which results in an increase to the minimum annual drawdown required for applicable pensions and annuities from 1 July 2023. Further information on these rates can be found on the Australian Taxation Office’s website here. 

Several rates and thresholds will also change in the new financial year, including the SG guarantee percentage which will increase from the existing 10.5% to 11%. Further information about these rates and thresholds can be found on the Australian Taxation Office’s website here.