Though most of the changes to superannuation discussed during the Federal Budget had been previously announced, they are still important to keep in mind when planning your superannuation strategy for the year to come.
As announced in March 2023, extra tax will need to be paid on the earnings associated with superannuation balances over $3 million. This will be a tax paid by the individual based on the growth in their superannuation accounts over a year, in proportion to their total super balance over $3 million.
For example, let’s say your super is worth $4.5 million and increases by $600,000 for the year. As 1/3 of your super is over $3 million, the extra 15% tax will only be applied on 1/3 of the growth meaning that it will be applied to $200,000 of the total $600,000. You will then have to pay 15% tax on the $200,000, equaling $30,000. You can pay that money yourself or release it from super to pay it.
However, this measure will not come into effect until the 2026 financial year. Businesses will soon have to pay their employee’s super with each pay run. If you pay your employees weekly, you will also have to pay their superannuation weekly. This will come into effect from 1 July 2026 so that payroll systems can be altered and amended to suit the changes.
The previous government introduced changes to what is known as Non-Arms Length Expenses (‘NALE’) of Self Managed Superannuation Funds. Where a fund underpays a related party for services or assets, then the fund is subject to 45% tax on either any earnings related to that expense or where you can’t relate an expense to any particular earnings, it is 45% tax on all the earnings of the Fund. The amendment will limit the tax on any non-arms length expense that doesn’t relate to any particular earnings to 45% at double the value of the expense.
A program will also be introduced to reduce the liabilities associated with unpaid and owed superannuation to the government. With these changes to superannuation to take place over the next few years, it is important to discuss with a professional adviser any action you may need to take in preparation. Start a conversation today.
Pay Your Quarterly Super Before 20 June 2023
In order to qualify for a tax deduction for the 2022-23 financial year, Super Guarantee contributions must be paid by 30 June 2023. Some clearing houses can take over a week to submit the payment to the super fund, but the fund must receive the contribution before the deadline. To keep on top, the best practice may be to pay before 20 June (to allow the extra time for the clearing houses to process the payment.