Contributions to superannuation
Employer contributions
The superannuation guarantee (SG) rate for the period 1 July 2024 to 30 June 2025 increases to 11.5%, up from the current rate of 11%. The increased rate applies to the ordinary time earnings of salaries and wages paid from 1 July 2024, irrespective of when the work was done or the pay period to which the payment relates.
An employer can claim a deduction for employee superannuation in 2023–24 only if the payment is made by 30 June 2024. This means that the contribution must be received by the employee’s superannuation fund by that date. Amounts sitting in clearing houses on that date are not considered to be received by the fund for income tax deductibility purposes.
Businesses should remember to:
manually update their payroll systems (where not automatically updated) to increase the SG rate from 1 July 2024 to 11.5%;
meet their employer SG obligations for the June 2024 quarter by 28 July 2024 — the ATO’s free Small Business Superannuation Clearing House (SBSCH) allows eligible employers to meet their SG obligations when the payment is received by the SBSCH. When using commercial clearing houses, the payment is not taken to be made for SG purposes until the fund receives the contribution;
identify which workers the business has to make SG contributions for, including contractors who are paid mainly for their labour (even if the contractor has an ABN);
not pay SG contributions where they have been provided with an SG employer shortfall exemption certificate by an employee who is a high-income earner working for multiple employers;
request the employee’s stapled fund details for new employees who don’t choose a superannuation fund under the choice of fund rules; and
check the current compliance status of an employee’s superannuation fund at Super Fund Lookup.
A failure to pay an employee’s SG in full, on time or to the right fund means the employer is:
required to lodge an SG statement by the 28th day of the second month following the end of the quarter (in the case of the June 2024 quarter, this is 28 August 2024); and
liable for the SG charge.
The penalties on employers for failing to meet their SG obligations are extremely draconian, including non-deductibility, interest and possible personal liability of directors in cases where a company has not met its obligations. Employers must ensure they pay their employees’ superannuation correctly.
Contributions caps
Concessional contributions (CC) cap
The concessional contributions cap for the 2023–24 income year is $27,500 and increases to $30,000 from 1 July 2024. Contributions made over this cap attract excess concessional contributions (ECC) tax. ECC are taxed at your marginal tax rate less a 15% tax offset to account for the contributions tax already paid by your superannuation fund. Up to 85% of ECC can be withdrawn from your superannuation fund but any ECC not withdrawn count towards your non-concessional contributions cap.
Any unused CC cap amounts from (up to) the five previous years may be able to be carried forward to increase your caps in later years where your total superannuation balance (TSB) is less than $500,000 on 30 June of the previous financial year.
Given the tax consequences of exceeding the CC cap, it is important to check the timing and amounts of contributions, including those made under a salary sacrifice arrangement. In particular, have regard to any delays that may arise when intermediaries are involved, such as banks, external payroll providers and clearing houses. Contributions count towards your cap in the year they are received by your superannuation fund.
Non-concessional contributions (NCC) cap
The non-concessional contributions cap for the 2023–24 income year is $110,000 and increases to $120,000 from 1 July 2024. If you exceed the cap this year, you may be eligible to automatically access the cap for two future years under the ‘bring-forward’ rule — up to $330,000 — but only where you are aged less than 75 years.
The amount of the NCC cap that can be brought forward depends on your TSB. If your TSB on 30 June 2023 was:
less than $1.68 million — the NCC cap for the first year of the three-year bring-forward period (2023–24 to 2025–26) is $330,000;
$1.68 million to less than $1.79 million — the NCC cap for the first year of the two-year bring-forward period (2023–24 to 2024–25) is $220,000;
$1.79 million to less than $1.9 million — the NCC cap is $110,000 for 2023–24 (the general NCC cap applies as there is no bring-forward period);
$1.9 million or more — the NCC cap is nil.
If you are aged 75 years or older throughout the whole of 2023–24, you are not eligible to use the bring-forward arrangement in 2023–24.
Government co-contribution
If you’re a low-or middle-income earner and make a personal NCC to your superannuation fund, the government may assist by making a co-contribution up to a maximum of $500. An individual is eligible to receive the co-contribution in their superannuation fund for 2023–24 if, broadly:
they have made at least one personal NCC to their superannuation fund during the 2023–24 financial year;
their total income is less than $57,016;
at least 10% of their total income comes from employment-related activities and/or carrying on a business; and
they are aged less than 71 years at the end of 30 June 2024.
Division 293 tax
Division 293 tax applies to tax CC of high-income earners. Where an individual’s combined Division 293 income and superannuation contributions exceed the $250,000 threshold, the excess over the threshold or the taxable superannuation contributions (whichever is less) is taxed at 15%. Your Division 293 tax liability can be paid with your own money or by releasing money from your superannuation fund.
Tax offset for spouse contributions
If you make a NCC to a superannuation fund on behalf of your spouse (married or de facto) and their income is less than $40,000, you may be eligible to claim a tax offset of up to $540. A range of eligibility conditions apply.
The tax offset amount phases out when your spouse’s income exceeds $37,000 and is completely reduced when your spouse’s income reaches $40,000. The contributions are treated as NCC in your spouse’s superannuation account and the tax offset is claimed in your tax return.
Does the work test still apply to personal contributions?
Either the work test or work test exemption must be satisfied to claim a deduction for a personal superannuation contribution if you are aged 67 to 74 years. The work test is satisfied if you are gainfully employed for at least 40 hours during a consecutive 30-day period in the financial year in which the contributions are made.
The work test exemption — which allows voluntary contributions to be made for an extra 12 months from the end of the financial year in which you retire — is satisfied if:
you satisfied the work test in the financial year before the year in which you made the contributions;
your TSB is less than $300,000 at the end of the previous financial year; and
you did not use the work test exemption in a previous financial year.
If you are aged less than 67 years, your fund can accept all types of contributions other than downsizer contributions, which can be made only if you are aged 55 years or older.
If you are aged 75 years or older, your fund can accept:
compulsory employer (SG) contributions;
downsizer contributions; and
voluntary employer (salary sacrifice), personal and spouse contributions made within 28 days after the end of the month in which you turn 75 years.
Transfer balance cap
The general transfer balance cap (TBC) for 2023–24 is $1.9 million and places a limit on the total amount of superannuation that can be transferred into the retirement phase. Earnings on assets held in the retirement phase are tax-free.
When you start a retirement phase income stream for the first time, your personal TBC is equal to the general TBC at that time. Over time, the general TBC increases due to indexation. If, at the time you commenced your income stream, you:
maximised your personal TBC — your personal TBC does not increase with indexation;
only partially used your personal TBC — your personal TBC is proportionately indexed, based on the highest ever balance of your TBC.
It is important to ensure that you work out the amount of your personal TBC if you have commenced a retirement phase income stream so that you do not exceed your personal TBC.
If you exceed your personal TBC, you may have to:
commute the excess into a lump sum payment or back into accumulation phase (where the earnings on the assets held in accumulation phase will be taxable); and
pay tax on the notional earnings related to the excess.
The ATO will advise you of the amount that needs to be commuted as well as the tax on the notional earnings.
Pension standards — minimum annual payments
When you have commenced a retirement phase income stream, minimum payment rules apply. (A maximum amount of 10% of your account balance applies only for transition to retirement pensions that are not in the retirement phase.)
For account-based pensions, you must pay a minimum amount at least once a year, based on your age on 1 July in the financial year in which the payment is made (or the commencement day of the pension if it started during the year). An exception applies for pensions that commence on or after 1 June in a financial year.
The minimum payment amounts returned to normal levels for 2023–24, following a halving of the minimum percentage for the 2019–20 to the 2022–23 income years.
If the minimum pension amount for 2023–24 is not paid:
the income stream ceases;
you are treated as if you did not pay an income stream from the start of 2023–24;
any payments you received during 2023–24 will be treated as lump sum payments; and
the income (earnings) from assets supporting the pension cannot be treated by the fund as being exempt from tax.
While the Commissioner has the discretion to allow an income stream to continue even if it does not meet the minimum pension standards, this applies in only limited circumstances so it is important to ensure that you meet the requirements of the law.
Claiming a deduction for personal contributions
If you want to claim a deduction for a personal superannuation contribution you have made during the 2023–24 income year, you will need to:
give your fund trustee a notice of intent to claim a deduction for personal superannuation contributions before the earlier of the day on which you lodge your 2024 tax return or 30 June 2025; and
receive a written acknowledgment of the receipt of the notice from the fund trustee.
A range of circumstances can invalidate a notice provided to your fund trustee so it is important to ensure that the notice is validly provided to the trustee to enable you to claim a deduction for the contribution. Any personal contributions that are not deductible are treated as non-concessional contributions (NCC) and count towards your NCC cap.
Disclaimer
This information is correct as of August 2024 and is provided solely for general information purposes and is not intended as professional advice. Readers should not act on the information contained therein without proper advice from a suitably qualified professional.
We expressly disclaim all liability for any loss or damage to any person or organisation for the consequences of anything done or omitted to be done by any such person relying on the contents of this information.
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