The superannuation guarantee amount for 2023–24 is 11% of an employee's ordinary time wages or salary. This rate is scheduled to increase progressively to 12% by July 2025, as outlined in the table below.
If an employee is paid wages before 1 July 2023, then superannuation will remain at 10.5%. If an employee is paid wages after 1 July 2023, then superannuation will be paid at 11%.
For the 2023 – 2024 financial year, the maximum super guarantee contribution that an employer must pay is increased to 11% of $249,080 per year, or $27,398.80.
Superannuation Guarantee
The rate of compulsory super that employers must pay eligible workers rose from 10.5% to 11% from 1 July 2023. Under the current legislated timetable, the Super Guarantee (SG) rate will continue to rise incrementally by 0.5% each financial year to 12% by 1 July 2025.
Legislated increase to the super guarantee rate
Although not announced as part of this year's Federal Budget, it's important for employers to note that the superannuation guarantee (SG) rate has increased to 11% from 1 July 2023. The new SG rate applies to payments made to workers on or after 1 July 2023.
In the 2021-22 financial year, the super guarantee rate that your employer was obligated to pay was 10% of your annual income. Note, effective from 1 July 2022, the super guarantee rate is now 10.5%.
1) Interest-rate forecast.
We project a year-end 2023 fed-funds rate of 5.25%, falling below 2.00% by mid-2025. That will help drive the 10-year Treasury yield down to 2.5% in 2025 from an average of 3.5% in 2023. We expect the 30-year mortgage rate to fall to 4.5% in 2025 from an average of 6.5% in 2023.
Total super balance cap set to increase
The total super balance cap is increasing from $1.7 million to $1.9 million from 1 July 2023, meaning you can't make additional non-concessional (post-tax) contributions to your super once your super balance exceeds $1.9 million as at 30 June 2023, or you may be penalised.
The superannuation guarantee rate (SG rate) is the minimum amount of super your employer legally has to pay to your super. From 1 July 2023, the superannuation rate is 11% of your ordinary time earnings.
It is generally taxed at a lower rate than your regular income. You typically pay 15% tax on your super contributions, and your withdrawals are tax-free if you're 60 or older. The investment earnings on your super are also only taxed at 15%.
Super is calculated by multiplying your gross salary and wages by 11%; this is known as the superannuation guarantee. Super is based on your Ordinary Time Earnings (OTE).
In 2023, the annual limit on concessional (before-tax) contributions is $27,500. If your total before-tax contributions were only $20,000 last year, you can then carry forward the remaining $7,500 from that year and add it to this financial year's cap, thereby increasing your limit to $35,000 for this year.
If you choose to leave the excess concessional contributions in super, you need to pay any extra tax and the ECC charge out of your own money. Individuals who make contributions on or after 1 July 2021 that exceed their cap, will no longer be liable to pay the ECC charge.
If you transfer more than $1.9 million, you'll generally be liable to pay 15% tax (or up to 30% tax if you've gone over before) from the day you go over the transfer balance cap. You'll have to take the excess money out of your pension account; your options for doing this depend on the type of account you have.
If you exceed the cap, you are liable to pay tax on the excess transfer balance earnings (excess transfer balance tax). You also need to transfer any excess to a super accumulation account or withdraw it as a lump sum. This is called a commutation.
ING predicts rates to range from 5% in the second quarter of 2023, rising to 5.5% in the third quarter, and then falling back to 5% in the final quarter of the year. They also predict interest rates ranging between 3% and 4.25% in 2024, staying at 3% by the end of 2025.
Fed policymakers opted last month to forego a rate increase to give themselves time to assess the still-developing effects of the previous hikes in borrowing costs, even as most also penciled in at least two more increases by the end of 2023.
Mr Wishart predicts that the base rate will rise just once more – to 5.25 per cent – but will remain there until 2024. “We think we're probably around the peak in mortgage rates now, but they will stay at this level until the middle of next year before starting to fall,” he added.
2 – It is highly likely your superannuation balance will return to where it once was. An economic recession is historically linked with a downturn in equities (shares) and the housing market. These are assets that most superannuation funds have a lot of money invested in.
Superannuation is primarily a long-term investment. Don't be too concerned about a negative month here or there because on average super funds have been providing positive returns for 25 of the last 31 financial years.
The SG requires employers to pay 11 per cent of an employee's earnings into their superannuation fund. From July 1, 2023, the SG is legislated to rise in half per cent increments each year until it reaches 12 per cent of wages in 2025.
If you meet all the eligibility criteria, the bring-forward rules allow you to make non-concessional contributions of up to three times the annual general non-concessional contributions cap in a single year (3 x $110,000 = $330,000 in 2023–24).
2) How much do I need to retire on $80000 a year? We will assume you are single, retire at age 65 and want funds to last until age 90. You need approximately $1,550,000 by retirement at 65 to live on $80,000 (indexed up each year for inflation) according to the Moneysmart Retirement Calculator at this present time.
The 4% rule states that you can comfortably withdraw 4% of your total investments in your first year of retirement and adjust that amount for inflation for every subsequent year without risking running out of money for at least 30 years.