As always, 1 July brings with it a number of changes in the tax, super and financial landscape
Some were first outlined in the 2023-24 Federal Budget in May this year, while others have been in the pipeline for much longer.
Here are some of the main changes you should know about going into the new financial year.
Increase to the superannuation Transfer Balance Cap
The general Transfer Balance Cap (TBC) — which is the maximum amount of super that can be transferred into a retirement phase account — has been increased from $1.7 million to $1.9 million.
If any transfers to your pension account exceed this limit, you may have to take the excess money out of your pension account (either by withdrawing it or transferring it to an accumulation account) and pay tax on any earnings related to it.1
The increase could have implications for anyone planning to commence a retirement phase pension or those who haven’t yet fully utilised their TBC. If you already have a retirement phase income stream on 1 July, you will have your own personal TBC (and receive only a portion of the $200,000 increase), which you can find using the myGov online portal or by contacting the ATO.
Super Guarantee bumped up to 11%
The Super Guarantee increased from 10.5% to 11% on 1 July, meaning your employer will be putting a slightly larger percentage of your salary into your super. It will continue to increase by 0.5% each year until it reaches 12% in 2025.
Minimum pension drawdown rates revert to pre-COVID levels
On 1 July, the Government ended the 50% reduction in minimum account-based pension drawdown rates. It had introduced this in 2020 to help retirees better manage their finances during the tumultuous pandemic period. Now that the minimum percentages have reverted to pre-COVID levels, retirees should consider re-examining their investment strategies to make sure they can accommodate the higher drawings.
Here are the minimum drawdown rates that apply in the 2023-24 financial year:
| Age | Minimum payment amount |
| Under 65 | 4% |
| 65-74 | 5% |
| 75-79 | 6% |
| 80-84 | 7% |
| 85-89 | 9% |
| 90-94 | 11% |
| 95 or older | 14% |
Increase to the eligibility age for Age Pension
On 1 July, the eligibility age for the Age Pension was increased to 67 for Australians born on or after 1 January 1957. Previously, the eligibility age was 66 years and 6 months.
Income thresholds go up for Medicare Levy Surcharge and Private Health Insurance Rebate
The income thresholds used to calculate the Medicare Levy Surcharge have gone up for the first time in eight years. As of 1 July 2023, individuals earning more than $93,000 and couples with a combined income higher than $186,000 (plus $1,500 for each dependent child after the first child) will face the Medicare Levy Surcharge if they don’t have private hospital cover.
This also means that individuals earning less than $144,001 and couples with a combined income lower than $288,001 (plus $1,500 for each dependent child after the first child) can receive the Private Health Insurance Rebate for their private hospital cover premiums.
Low- and middle-income tax offset draws to a close
The Government hasn’t announced any changes to tax rates or income thresholds for the 2023-24 financial year. As scheduled, the low- and middle-income tax offset (LMITO), which offered tax relief to Australians earning less than $126,000 per year, will not be reinstated. The tax offset was rolled out as a temporary measure in the 2018-19 financial year but was extended three times to ease cost of living pressures during the pandemic. Its expiration is expected to affect more than 10 million Australians.
Looking forward, the Labor government also plans to go ahead with the stage three tax cuts, which were passed by the Morrison government back in 2019. Due to come into effect July 2024, the cuts will abolish the 37% tax bracket on incomes between $120,000 and $180,000 and flatten the tax rate for those earning between $45,000 and $200,000 to 30%.
Eligibility for the Home Guarantee Scheme proposed to be expanded
Starting July 2023, the government has proposed that eligibility for the First Home Guarantee and the Regional First Home Buyer Guarantee will be expanded to include friends and family members. Currently, only spouses and de facto partners can apply. The two schemes are also proposed to become available to non-first home buyers, on the condition that they haven’t owned a property in Australia in the last ten years and that they are permanent residents (rather than just citizens).
Additionally, the Family Home Guarantee — which lets eligible single parents purchase a home with a deposit of as little as 2% — is also proposed to become available to legal guardians of children.
Cheaper childcare available for families
On 10 July, the Child Care Subsidy rates were raised from 85% to 90% for families on a combined annual income of $80,000 or less. For families who earn more than that, the subsidy rate will decrease by 1 percentage point for every additional $5,000 of family income until it reaches 0% for families earning $530,000. The higher subsidy rates are part of a $55.31 billion package to help reduce childcare costs for Australian families over the next four years.
For more information about these changes, visit the relevant government website or consider speaking to a qualified financial adviser, who will be able to explain how they might affect you and your financial goals.
Contact Carrick Aland’s award-winning Wealth Planning team on 1300 466 998 or visit carrickaland.com.au/wealth-planning/.
This report is prepared by Bridges Financial Services Pty Limited ABN 60 003 474 977 AFSL 240837 (Bridges). Bridges is an ASX Market Participant and part of the IOOF group of companies. This report is prepared by the IOOF Research team for: Bridges Financial Services Pty Limited ABN 60 003 474 977 AFSL 240837, Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323, Elders Financial Planning ABN 48 007 997 186 AFSL 224645, Financial Services Partners ABN 15 089 512 587 AFSL 237 590, Millennium3 Financial Services Pty Ltd ABN 61 094 529 987 AFSL 244252, RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429, Shadforth Financial Group Ltd ABN 27 127 508 472 AFSL 318613 (‘Advice Licensees’). The Advice Licensees are part of the IOOF group comprising IOOF Holdings ABN 49 100 103 722 and its related bodies corporate (IOOF group). The Advice Licensees and/or their associated entities, directors and/or employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this document or may provide services to the company referred to in this report. The document is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of the Advice Licensees. The Advice Licensees and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. The document is current as at the date of issue but may be superseded by future publications. You can confirm the currency of this document by checking the intranet site (links below). The information contained in this report is for the sole use of advisers and clients of AFSL entities authorised by the Advice Licensees. This report may be used on the express condition that you have obtained a copy of the Advice Licensees Financial Services Guide (FSG) from their respective website. Disclaimer: The information in this report is general advice only and does not take into account the financial circumstances, needs and objectives of any particular investor. Before acting on the advice contained in this document, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before making a decision to acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance. The contents of this report should not be disclosed, in whole or in part, to any other party without the prior consent of the IOOF Research Team and Advice Licensees. To the extent permitted by the law, the IOOF Research team and Advice Licensees and their associated entities are not liable for any loss or damage arising from, or in relation to, the contents of this report. For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.
