Author: Emma Partenza, Manager, TAG Financial Services
There are some expected changes to the superannuation rules in 2023. Here’s an outline of some:
General Transfer Balance Cap (TBC) indexation increase
It is expected the general TBC will increase from $1,700,000 to $1,900,000 from 1 July 2023 based on expected CPI figures just released by the ABS.
When the TBC came into effect on 1 July 2017, it was stated indexation would occur in $100,000 increments. We saw the first round of indexation of the cap on 1 July 2021 when the general TBC increased to $1,700,000 (from its original value of $1,600,000).
Due to 2022’s expeditious rise in inflation, it is reported that we are most likely to see a rise of double indexation this year– i.e. up by $200,000.
It is again important to note members already in receipt of an account-based pension (ABP) will not see a full $200,000 automatic rise in the amount of their TBC. It would increase by an unused cap portion percentage. This means we will see members with TBCs of between $1,600,000 and $1,900,000. Any member who has yet to start a pension may consider deferring this until 1 July 2023 to access the full $1,900,000 TBC.
It’s important to note that all TBAR reporting should be done by 30 June 2023, to ensure the ATO indexation calculations are done correctly and they receive indexation based on what they’re entitled to.
Contributions
It is unlikely there will be an increase in the concessional or non-concessional contribution caps from 1 July 2023.
Indexation of the contribution caps is based on AWOTE (average weekly ordinary time earnings) and there appears to be an insufficient increase in this for contribution caps to increase next financial year.
Contributions caps should remain as:
- Concessional Contributions $27,500 p.a.
- Non-Concessional Contributions $110,000 p.a.
Bring forward caps may look like the following:
Please note the thresholds will change only, resulting from the increase in the General TBC.
Without the contribution caps being altered, the potential change in the general TBC will result in an increased total superannuation balance (TSB) which determines whether members could make certain types of contributions.
This increase will allow a greater number of members to be able to make contributions or be able to make further contributions into their funds, especially where they may have been restricted over the past few years
Transfer Balance Cap Reporting (TBAR)
From 1 July 2023, TBAR reporting of debits and credits under the TBC will be required on a quarterly basis. This is for all funds, regardless of whether they were previously considered a quarterly or annual lodger in respect to the transfer balance account reporting.
We are now in our 6th year of TBA reporting and the ATO has taken an educative approach to the lodgement of TBAR and is yet to penalise for any late lodgements of these reports. Could now be the time for the ATO to take a tougher stance?
It will become more critical for super fund transactions to be coded regularly and have adequate data feeds in place to ensure appropriate transactions are reported.
Minimum pension requirements FY2023-24
Since March 2020, pension minimums required to be paid have been halved due to the COVID-19 pandemic. 1 July 2023 should see this lapse and convert back to the statutory minimum pension requirements under SIS. However, we will have to await the Federal Government confirmation in late May/June this year to see whether it will be extended for another year.
This would have an impact on your clients cashflow requirements and trustees should start planning now to ensure minimum pensions will be able to be met from FY2023-24 as pensions must be paid in cash.
Recent changes
Just a reminder we have recently seen the following changes come into play:
- Downsizer age reduced to age 55 from 1 January 2023 (link to article)
- Increase in Centrelink incomes test in respect to eligibility for the Commonwealth Seniors Health Card (link to article).
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2022. Please do not reproduce without the expressed written consent of the author.