2023 Budget: Superannuation

2023 Budget: Superannuation

The Treasurer, Jim Chalmers, has delivered the 2023-2024 Federal Budget, with the key theme of fairness, as it largely focuses on the provision of assistance to Australians to help them manage the cost of living, and doing so in a sustainable way.

There are several welcome changes to the announcements aimed at assisting the vulnerable – aged care workers, single parents and parents who require access to childcare services to name a few. Indirectly, these measures could be seen as a benefit to women who predominantly fill these categories, though the payment of SG on paid parental leave remains a missed opportunity.

From a superannuation perspective, compared to previous budgets, only a few announcements were made (noting that these measures have not been legislated). These are:

Better targeted tax concessions – higher tax on superannuation balances of $3 million or more. Individuals with superannuation balances exceeding this amount will have to pay an additional 15% on the earnings of their super account that exceed $100,000. (Start date of 1 July 2025)  These changes will impact:

  • members – those with balances exceeding $3m (estimated to impact 0.5% of accountholders – approx. 80,000 people when implemented) as they will now incur additional tax; and
  • superannuation funds – required to update systems to administer the additional 15% attributed to the earnings corresponding to the proportion of balances exceeding $3m (i.e. a total of 30% tax on earnings related to assets above $3m whilst assets below $3m continue to be taxed at 15%.

Increased frequency of SG payments – aligning payment of SG contributions with payroll frequency. This aims to deliver benefits to employees, not only by making it easier to track their contributions, but also to boost retirement savings due to funds being invested sooner. (Start date of 1 July 2026) This will impact:

  • employers and payroll providers – who will need to manage cashflows to account for the payment of superannuation being aligned to the payment of wages;
  • members – whose contributions will be paid more frequently allowing them to benefit from compounding of interest over their working life;
  • superannuation fund administrators – who will need to review and manage changing workloads and cashflows due to the increased frequency of contributions received;
  • the ATO – who will be required to oversee and enforce the changes to superannuation contribution payments.

Changes to Non-Arm’s Length Income (NALI) and Non-Arm’s Length Expenditure (NALE) provisions – solely applicable to income and expenditure by super funds. Changes to NALI and NALE will impact:

  • SMSFs and APRA regulated funds – by limiting the income that is taxable as NALI to twice the level of a general expense;
  • large APRA regulated funds – as they will be exempt from the NALI provisions for general and specific expenses incurred by the fund and the exclusion of contributions from being taxable as NALI; and
  • all funds – as expenditure that occurred prior to the 2018/19 income year will be exempt.

At face value, the superannuation changes announced appear straightforward, whilst also providing a reasonable transition period for implementation. History tells us though that ‘the devil is always in the detail’ so, although the timeframes appear far in the distance, discussions with relevant vendors is always better commenced sooner rather than later.