Changes Taking Effect July 1st – What You Must Know
With the end of the financial year upon us, we need to gain a deeper understanding of how the changes that are coming into effect at the beginning of the new financial year will affect us, and more importantly, how we can benefit from them.
Primary announcements include;
- Changes to superannuation guarantee and contributions
- Tax relief to eligible businesses
- STP reporting obligations
These new changes may impact you individually or as a business, so here is your cheat sheet to ensure you are on top of it in preparation for the 2023 financial year.
Table of Contents
Superannuation Guarantee Rate Increases
From 1st July 2021, the Superannuation Guarantee (SG) rate will increase from 9.5% to 10%. The rate has been scheduled to progressively increase by 0.5% each year until it reaches its final value of 12% on 1st July 2025.
For employees on a superannuation-inclusive salary, this does not mean that a pay increase will be automatically allocated. Depending on your employment agreement, your take-home pay may reduce by 0.5% to support the rate increase. Otherwise, your take-home pay will remain the same and your superannuation account balance will consequently benefit.
To ensure these changes are implemented effectively, there are certain responsibilities to be undertaken by the employer. Whilst it is at the employer’s discretion to make changes to an employee’s remuneration, it is also the employer’s responsibility to ensure that their employees are being paid the correct amount of superannuation. This will avoid any form of penalisation as we move forward into the new financial.
Annual Superannuation Guarantee Rate Changes
| Year | SG rate |
| 1 July 2020 – 30 June 2021 | 9.5% |
| 1 July 2021 – 30 June 2022 | 10% |
| 1 July 2022 – 30 June 2023 | 10.5% |
| 1 July 2023 – 30 June 2024 | 11% |
| 1 July 2024 – 30 June 2025 | 11.5% |
| 1 July 2025 – 30 June 2026 | 12% |
Concessional and Non-Concessional Contribution Cap Increases
Furthermore, as of 1st July 2021, the Superannuation Contribution caps will increase, allowing you to contribute more to your superannuation fund.
The concessional contribution cap will increase from $25,000 to $27,500, while the non-concessional cap will increase from $100,000 to $110,000.
Capitalising on the “bring forward” rule also allows individuals under the age of 65 to make contributions of up to three times the cap in a single year.
| Year | Concessional Cap | Non-concessional cap |
| 1 July 2021 – 30 June 2022 | $27,500 | $110,000 or $330,000 over 3 years |
Transfer Balance Cap Increases
The general transfer balance cap (TBC) will increase from $1.6 million to $1.7 million from 1st July 2021. However, it is important to note, not everyone will benefit from the increase.
The TBC limits how much superannuation can be transferred from your accumulation superannuation account into a tax-free retirement account.
Depending on your circumstances, each individual will now have their own personal transfer balance cap.
Transfer Balance Cap Changes
| My super is… | TBC to 30 June 2021 | TBC from 1 July 2021 |
| In accumulation phase | $1.6m | $1.7m |
| In retirement phase and I reached the $1.6m cap limit between 1 July 2017 and 30 June 2021 | $1.6m | $1.6m |
| In retirement phase, and I have never reached the $1.6m cap limit at any time between 1 July 2017 and 30 June 2021 | $1.6m | $1.6m plus indexation on the amount between your highest ever balance and the $1.6m cap. |
Minimum Superannuation Drawdown Rates Reduced
An extension of the temporary reduction in minimum drawdown rates for account-based pensions has been announced until 30 June 2022.
Retirees must withdraw a minimum income each financial year when they have an account-based pension. This reduction will allow retirees more flexibility and choice with regard to how they would like to ‘drawdown’ their income.
| Age | Default minimum drawdown rates | 2019-20, 2020-21 & 2021-22 reduced rates |
| Under 65 | 4% | 2% |
| 65-74 | 5% | 2.5% |
| 75-79 | 6% | 3% |
| 80-84 | 7% | 3.5% |
| 85-89 | 9% | 4.5% |
| 90-94 | 11% | 5.5% |
| 95 or more | 14% | 7% |
Fig 1: Drawdown Percentage Comparison Table
Business Tax Breaks Extended
As announced in the new 2021-22 Federal Budget, Temporary Full Expensing was introduced to allow eligible businesses to acquire eligible capital assets and claim an immediate tax deduction with no purchasing limit until 30 June 2023.
Eligible businesses with an aggregated turnover of less than $5 billion can now claim the business portion of the cost of new depreciating assets, where those assets are first used or installed, ready to use between 7.30 pm AEDT on 6 October 2020 and 30 June 2023.
Single Touch Payroll Reporting
If you haven’t registered, put this on your immediate task list now to ensure you meet your Single Touch Payroll (STP) reporting obligations. STP will apply to most businesses from 1st July 2021. This includes small businesses and businesses with closely held employees.
We Are Here To Help!
For some, a little planning and preparation will need to be considered in respect of the new changes – as always, we are here to help.
Our team of highly experienced tax accountants at Grow Advisory Group can offer you some clarity and advice depending on your personal situation. If you have any questions regarding how these changes may affect you and how you can benefit, please connect with us.
For a helping hand, phone us on (07) 5599 5700 or send us an email at [email protected].
If you’re looking for tax planning tips to reduce your taxable income, don’t miss our article, ‘Last Minute End Of Financial Year Tax Planning Tips‘.
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Disclaimer: The information contained in this blog is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from an accountant and/or financial adviser.
