A couple of important changes are occurring from 1 July, affecting lots of you so worth a read.
The super guarantee payment increases to 10.5%. If you are running payroll through MYOB or XERO the rates should update automatically, but you need to check the July pay to make sure. Click on the links here for instructions for updating MYOB and Xero if needed.
Those salary sacrificing to maximise super contributions may need to reduce their salary sacrifice to remain within the cap, now the SGC is higher. The concessional cap remains at $27,500.
Super is now payable on all employee earnings, even those earning less than $450 per month. This might mean you have employees that did not receive super before but will now. You need to know their superfund details. Those under 18 are only due super if they work for more than 30 hours in a week.
The work test has been removed for those under age 75, making it possible for non working seniors to continue to contribute to super. This could be a useful strategy, allowing you to continue to building savings in the tax effective super environment.
Those in pension phase can continue to pay the reduced Covid pensions for another year. The reductions were bought in due to low interest rates reducing pensioners earnings, so we believe this will be the last year these reduced rates will apply. The minimum pension payments required, as a % of your 30 June 2022 balance, are shown below.
|Age at 1 July ||Reduced minimum|
drawdown rates for 2022/23
drawdown rates for 2023/24
|65 to 74||2.5%||5.0%|
|75 to 79||3.0%||6.0%|
|80 to 84||3.5%||7.0%|
|85 to 89||4.5%||9.0%|
|90 to 94||5.5%||11.0%|
|95 or more||7.0%||14.0%|
As a general takeaway for everyone, look at the % draw downs in the right hand column above. These figures are designed to whittle away the income and capital of your super fund so at age 95 there is nothing left. A tragedy if you were hoping to inherit your parents remaining super balance!
More important point though, is ensuring your SMSF is structured for long term liquidity to be able to physically pay the pension as the required % increases with age. A common problem is having too much of the SMSF allocated to property. If these return say net 4%, you will have a liquidity problem when you are 70. You need to plan early for this and be prepared to sell them at some point. After all, you can’t eat bricks!
Lindsay 0413 952180