Important changes from 1 July 2023

By Luke Kidd

Important rates, thresholds and caps will be updated from the start of the 2023/24 financial year. See below a summary of some of these key changes:

Account based pension payment minimums

Since the 2019/20 financial year, account based pension minimum payment requirements have been reduced by 50%. This measure has been effective to help retirees better preserve their investment balance by reducing the amount that they must draw down each financial year. This reduction will end from 1 July 2023 and account-based pension payment rates will return to the normal amounts:

Member age                       Payment %

Under age 65                     4%

65-74                                   5%

75-79                                     6%

80-84                                    7%

85-89                                    9%

90-94                                   11%

95 and over                         14%

Transfer balance cap

The transfer balance cap is the amount that superannuation account holders can commute toward tax effective retirement phase income streams. This cap will be increased from $1.7m to $1.9m from 1 July 2023.

Members that have existing pensions will receive a proportional increase in their personal transfer balance cap. Meaning that members who have maxed their cap will not have any increase to their personal transfer balance cap.

The transfer balance cap also determines the cap for members making after-tax non-concessional contributions toward superannuation. The increase in the cap provides further flexibility for members to top-up their superannuation.

Superannuation Guarantee (SG) contributions

The compulsory super contribution amount that employers must make to their employees super accounts will increase from 10.5% to 11% from 1 July 2023. This percentage is due to increase further by 0.5% per year until it reaches 12%.

Employees who are receiving SG contributions may need to consider their other contribution such as salary sacrifice or personal deductible contributions as employer contributions count toward the concessional contribution cap.

Centrelink thresholds

The lower thresholds and cut-off points for the age pension assets and income test is subject to regular indexation and the next increase will occur on 1 July 2023. These thresholds determine how much age pension recipients will receive.

The new thresholds will be as follows:

Assets test                                   Lower threshold               Cut-off point                      Increase

Single homeowners                       $301,750                            $656,500                            $21,750

Single non-homeowner                 $543,750                            $898,500                            $39,250

Couple homeowners                     $451,500                            $986,500                            $32,500

Couple non-homeowners             $693,500                            $1,228,500                         $50,000

Income test (fortnightly)               Lower threshold               Cut-off point                      Increase

Singles                                                  $204                                     $2,332                                 $14

Couples                                                $360                                     $3,568                                 $24

Does this affect you?

If you are not sure how these changes might affect your financial plan, please feel free to contact us to discuss your circumstances and whether you will be affected.

Luke Kidd in an authorised representative of Alliance Wealth Pty Ltd. (AR: 001242685)