Superannuation Update – Autumn edition

Employers Be Aware – SG Contribution Levels Are Rising

The minimum SG rate you must pay for each eligible employee from 1 July 2024 was 11.50% of their ordinary time earnings (OTE). This is legislated to increase to 12% on 1 July 2025.

History of the SGC requirements from 2002 to 2026 is as follows:

Rate

9.00%

9.25%

9.50%

10.00%

10.50%

11.00%

11.50%

12.00%

Please note, as an employer, if the required rate of SG isn’t paid by the quarterly due date, then a Superannuation Guarantee Charge (SGC) will be payable to the ATO. The SGC includes all the SG amounts owing to their employees, plus interest and an administration fee.

Employers who don’t pay the SG into the correct super fund by the due date must report and rectify the missed payment by lodging an SG Statement and paying the SGC.

Superannuation FAQs

Q: What is superannuation?

Superannuation is a tax effective way to save money for retirement.

Superannuation, or “super,” is a compulsory, long-term savings structure in Australia designed to help people fund their retirement. It’s essentially a retirement savings plan where employers are required to contribute a percentage of an employee’s wages into a superannuation fund on their behalf. This money is invested, grows over time, and is then available to the employee when they retire.

Q: How much money do you really need to retire?

The Association of Superannuation Funds of Australia (ASFA) states that in order to enjoy a ‘comfortable’ lifestyle in retirement, you should have savings of the following:

• $640,000 for a couple, or
• $545,000 if you are single.

Q: How is my super taxed?

Contributions are broadly categorised as either concessional or non-concessional.

Here’s the difference:

• Concessional superannuation contributions are contributions on which a tax deduction has been claimed by an employer or an individual. They are taxed at 15% within the super fund (with a tax offset available for low-income earner).
• Non-concessional superannuation contributions are made from after-tax income. These include many personal contributions and government co-contributions. Non-concessional contributions are not taxed within the fund.

Earnings from investments are taxed at 15% in the accumulation phase.

Once you are over age 60, earnings in the pension phase and any payouts from the super fund, are tax-free.

Q: How can I contribute to my superannuation fund?

If you are employed, over 18, your employer will contribute 11.50% of your ordinary time earnings to superannuation (due to rise to 12.00% after 1 July 2025).

Other ways to boost your super fund may include:

• Ask your employer to make concessional salary sacrifice contributions from your pre-tax income.
• Make personal contributions from your after-tax income. You may be able to claim a tax deduction for these contributions (subject to set limits), in which case they will become concessional. If no tax deduction is claimed they will be non-concessional.
• Contribute on behalf of a spouse who earns less than $37,000 a year, which then allows you to claim a tax offset of up to $540.
• Sell your home to qualify for a special ‘downsizing’ contribution (available to over 65s only).
• Make a personal non-concessional contribution and you may qualify for up to $500 as a government co-contribution (available to low to middle-income earners only).

Please note – age limits and work tests may apply to some types of contributions.

Q: When can I access my superannuation?

You can access your super when you:

• Turn 65, even if you’re still working.
• Reach preservation age (generally 60) and have retired.
• Start a transition to retirement (TTR) income stream.
• Face severe financial hardship, specific medical conditions, or under the first home super saver scheme.

Q: Who can I leave my superannuation to?

You can elect to have your superannuation paid to your legal personal representative if your super fund allows binding death benefit nominations. The money is then distributed as instructed by your Will.

As an alternative, you can instruct your fund trustees to pay your death benefit to one or more of your ‘dependents.’ Under superannuation law these are:

• Your spouse (includes same-sex and de facto partners),
• Children
• A financial dependent
• People you had an inter-dependency relationship with.

If you don’t have a binding nomination, your super fund’s trustees will decide which dependants will receive the death benefit. They will be guided, but are not bound by, any non-binding nomination.

Q: What is a self-managed super fund (SMSF)?

A self-managed super fund is also known as DIY super, so as you might expect, it’s a private super fund that you’re in control of. They are set up to provide benefits in retirement to the members of the fund, who are also trustees. The trustees of the fund are responsible for managing the assets of the SMSF as well as making sure it’s compliant with the latest legislation and tax regulations. Because you’re managing your own super, you need to make sure all the correct documentation and tax information is completed before any deadlines and that you’re up to date with the current legislation.

Q: Who can be a trustee of an SMSF?

In order to become a trustee of a SMSF, you need to consent to and sign a trustee declaration. All the members of a SMSF need to be trustees too and there can be up to six per fund. You can’t become a trustee if you have ever been registered bankrupt or have previously been disqualified as a SMSF trustee. A corporate trustee is also an option as a trustee where all members must also be a director of the trustee company.

Q: How much do you need for a SMSF?

If you’re going to put the time and effort required into a SMSF, it is generally agreed that you need at least $200,000 to make it worthwhile. SMSF fees are charged based on a flat fee rather than as a percentage of the balance which is why they are often chosen for larger funds with substantial assets.

Q: Do I need to hire someone to manage my SMSF?

Yes, every SMSF needs to have an independent advisor who specialises in the area and can help you to add value to the fund. At Financially Sorted, we have an experienced team of accountants who can help you to set up &/or manage a SMSF. We can also help you to prepare for any audits or add or change members.

Q: Can I pay myself for managing my SMSF?

The Superannuation Industry (Supervision) Act 1993, Section 17A (g) prohibits a SMSF trustee from receiving any payment for services or duties performed because they are undertaking those duties in their capacity as an individual trustee, or a director of a corporate trustee.

Q: Can I use my SMSF to pay off my mortgage?

Yes, you can potentially use your Self-Managed Superannuation Fund (SMSF) to repay your mortgage, but it’s not a straightforward process and requires careful consideration. Generally, you can withdraw a lump sum from your SMSF to pay off your mortgage, or you can use pension withdrawals to cover monthly repayments.

However, you must meet specific conditions of release for accessing superannuation, and there are potential tax implications to consider.

Q: How do I make the most of my superannuation?

Superannuation remains, for most people, the best way to save for their retirement. But it can be complicated and there are numerous rules to navigate.

That creates challenges, but it also generates opportunities, many of which can add thousands of dollars per year to your retirement income.

If you are ready to unearth those opportunities and make the most of your super, talk to our team and we will help you make the right decisions for you based on your personal circumstances.

Disclaimer: this information represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs. We can certainly assist with this.

7 Rules for Saving Money

1. 50/30/20 Bucket Rule

Allocate your income to these buckets:

50% Needs Bucket

• Food
• HousingInsurance
• Basic Utilities
• Transportation

30% Wants Bucket

• Travel
• Fashion/Gear
• Entertainment

 20% Savings Bucket

• Emergency Fund
• Debt Payments
• Investments
• Retirement/Superannuation

2. The Rule of 72

Get excited about saving. Use the Rule of 72 to quickly calculate how many years it will take to double your money (Divide 72 by your savings account interest rate).

For example:

• Interest rate of 8% return
• 72 divided by 8 = 9
• You will double your savings every nine years.

3. 1% Rule for Impulse Buys

If the item is over 1% of your annual gross income, wait 3 days before purchasing. If you still want the item after 3 days, get it.

Why this works – you will often realise you don’t want or need the item.

4. Superannuation Match Rule

Many employers will match part of the money you put into super. So maximise your super contribution up to the highest employer match offered.

5. 3X Emergency Fund Rule

Keep three to six times your monthly income in an emergency fund. When a rainy day comes, you will weather the storm.

6. The Rule of Automation

When it comes to money use ‘automation’ strategically to save time, reduce stress, and improve financial health. Focus on automating repetitive tasks like bill payments and transfers however, retain some manual oversight to maintain a sense of mindful spending and avoid wasting money on unused subscriptions. Completely automating everything creates a risk of losing control.

As well as automating paayments, you can also automate ‘saving’ by investing money before you see it. Set up an automation for a portion of each paycheck or income stream to immediately transfer to a savings or investment account. This eliminates the temptation to spend available funds, ensuring that a portion of each income is automatically allocated towards financial goals.

7. Item In, Item Out Rule

When you purchase one item, donate, toss or sell another. Minimalism is a dual discipline. Manage both inbound and outbound possessions to enjoy equilibrium.