Changes in legislation on 1 July 2023

ESSSuper - 16 Jun 2023

The difference a day makes!

We know that keeping up with superannuation legislation can be challenging, as the rules and regulations can be complex and subject to frequent modifications. So you're across the key updates, here's the high level of how upcoming changes could impact you.

Whether you're still working and paying into your super, recently retired and looking to transfer funds into your super, have just started drawing on your nest egg, or have come into a financial windfall, read on to find out more.

Increase to the employer additional contribution rate

If you're a member of the ESSS Defined Benefit Fund who has reached your maximum benefit multiple, you're eligible to receive additional contributions from your employer. Those additional contributions are based on a percentage of your salary and paid into your ESSSuper Accumulation Plan account.

From 1 July 2023, the employer additional contribution rate into the Accumulation Plan will increase from 6% to 8%.

This rate will increase to 12% by 1 July 2026 as outlined in the table below:

We will advise you and your employer in writing when you reach your maximum benefit multiple. Employer additional contributions paid into the Accumulation Plan will count towards your concessional contributions cap. For further information about contribution caps, please refer to our Tax and super web page.

Increase to the transfer balance cap (TBC) from $1.7 million to $1.9 million

Have you recently retired and are looking to transfer money into a retirement income stream for the years ahead?

If so, then it might put a smile on your face to know that from 1 July 2023, the limit on the total amount of super that you, as an individual, can transfer to a retirement income stream will increase by $200,000, meaning you can now transfer up to $1.9 million, up from $1.7 million.

For more information, please search "Indexation of the general transfer balance cap" on the Australian Taxation Office (ATO) website at ato.gov.au

How the increased transfer balance cap may impact your total superannuation balance

Your total super balance is the total amount of super you have with all super funds (not just ESSSuper) as calculated by the ATO on 30 June each year, based on reports from your super fund(s). Non-concessional (or after-tax) contributions are the payments you can make into your super that come from money that has already had tax deducted, i.e. your take-home pay or savings outside of super.

If your total super balance is equal to or greater than the current transfer balance cap, your non-concessional contribution cap will be zero. This means you won't be able to make any after-tax contributions to super.

From 1 July 2023, the transfer balance cap will increase to $1.9 million. This means that if your total superannuation balance is less than $1.9 million, you will be able to make non-concessional contributions. Doing so will result in an increase to the total super balance you can have when utilising bring-forward arrangements.

Bring-forward arrangements allow you to contribute three years' worth of non-concessional contributions in less than three years, provided you have completed any previous three-year arrangement. The bring-forward arrangements from 1 July 2023 are:

• If you have a total super balance of $1.68 million or less, you can make non-concessional contributions of up to $330,000 by bringing forward the caps over a three-year period
• If you have a total super balance of more than $1.68 million but less than $1.79 million, you can contribute up to $220,000 by bringing forward the caps over a two-year period
• If you have a total super balance of more than $1.79 million but less than $1.9 million, you can contribute up to $110,000 (no bring-forward period, as the general non-concessional contributions cap applies)
• But if you have $1.9 million or more, you're no longer eligible to contribute non-concessional contributions or access the bring-forward rule.

For more information, please search "Contribution caps" on the ATO website at ato.gov.au

Superannuation guarantee (SG) increase from 10.5% to 11%

If your employer isn't paying into your defined benefit account (i.e. if you have an employer which isn't in the emergency services or paying into State Super), they must pay superannuation guarantee (SG) contributions instead.

From 1 July 2023, the amount that employers have to pay into your super fund will increase from 10.5% of your salary to 11%. While this may seem only a small increase, over time it could have an appreciable impact on your retirement savings, which is very good news.

Increase to the low rate cap (taxed element) from $230,000 to $235,000

Are you between your preservation age and 60, retired, and want to access your super? If so, you might be interested to know that from 1 July 2023, the amount of taxable super you can withdraw without paying tax will increase from $230,000 to $235,000.

For more information, please search "Key super rates and thresholds" on the ATO website at ato.gov.au

Increase to the untaxed plan cap from $1,650,000 to $1,705,000

From 1 July 2023 the lifetime limit on the amount of untaxed superannuation benefits (i.e. those that haven't been subject to the usual contributions tax when they were paid into the fund) you can receive will increase from $1,650,000 to $1,705,000 without incurring additional tax. This typically relates to unfunded exempt public sector defined benefit funds and affects ESSSuper Beneficiary Accounts for any untaxed benefits withdrawn from the fund.

For more information, please search "Key super rates and thresholds" on the ATO website at ato.gov.au

Increase to Government co-contributions caps

Super co-contributions are Government contributions made automatically to the super funds of eligible low- and middle-income earners to help boost their retirement savings.

From 1 July 2023, if you earn between $43,445 (previously $42,016) and $58,445 (previously $57,016) and pay extra into your super by making what is known as an after-tax contribution, then you may now be eligible to receive government contributions to your personal super fund.

For more information, please refer to the ATO website at ato.gov.au/super-co-contribution

Increase to the defined benefit lifetime pension cap from $106,250 to $118,750

As you're with ESSSuper you may be one of the lucky recipients of a defined benefit lifetime pension, which gives you a stable income stream and shields you somewhat from market volatility affecting your benefits, and the uncertainty of outliving your savings.

From 1 July 2023 there will be an increase to the defined pension cap maximum amount of annual income that you can receive from your defined benefit lifetime pension without incurring additional tax. The new defined benefit lifetime pension cap is $118,750, an increase from $106,250, meaning more individuals may receive a higher level of retirement income without incurring additional tax.

For more information, please search "Transfer balance cap - capped defined benefit income streams" on the ATO website at ato.gov.au

Emergency Services Superannuation Board (ABN 28 161 296 741), the Trustee of the Emergency Services Superannuation Scheme (ABN 85 894 637 037) (ESSSuper).

There are maximum limits on before- and after-tax contributions which are set by the Government, and if these limits are exceeded you may be liable for additional tax. It is important that you monitor your contribution levels as they may change from year to year. Please read the Product Disclosure Statement relevant to your particular fund, available from ESSSuper, for more information.

Benefits in ESSSuper's Accumulation Plan, Income Streams and Beneficiary Account products are not guaranteed or underwritten by the Victorian Government or ESSSuper, and ESSSuper does not come under the jurisdiction of the Australian Financial Complaints Authority. ESSSuper comes under the jurisdiction of the Victorian Civil and Administrative Tribunal.

The information contained in this article is of a general nature only. It should not be considered as a substitute for reading ESSSuper's Product Disclosure Statement (PDS) that contains detailed information about ESSSuper products, services and features. Before making a decision about an ESSSuper product, you should consider the appropriateness of the product to your personal objectives, financial situation and needs. It may also be beneficial to seek professional advice from a licensed financial planner or adviser. An ESSSuper PDS is available at esssuper.com.au/pds or by calling 1300 650 161.