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Budget 2024 Review – My SMSF

My SMSF Budget 2024 Review for SMSF Members

Introduction

The 2024 Federal Budget has introduced changes to superannuation, tax structures, and investment frameworks, which we believe is particularly beneficial to Self-Managed Super Funds (SMSFs). Our comprehensive analysis aims to explore these changes and offer strategic insights into how My SMSF Members can navigate this new landscape.

Superannuation Contributions and Caps

The government has adjusted the limits on superannuation contributions to facilitate increased savings for retirement, which is pivotal for SMSF members seeking to maximize their fund’s performance.

Increase in Superannuation Guarantee (SG) Rate The Superannuation Guarantee rate will increase from 11% to 11.5% starting from 1 July 2024 and ending at 12% from 1 July 2025. This incremental rise aims to boost retirement savings for Australians, ensuring a more comfortable retirement.

Financial YearSG Rate
2023-202411.0%
2024-202511.5%

 

Table 1: Superannuation Contributions Caps for 2024

Type of Contribution2023 Cap2024 CapChange
Concessional (Pre-Tax)$27,500$30,000+$2,500
Non-Concessional (Post-Tax)$110,000$120,000+$10,000

Analysis:
The increase in both concessional and non-concessional caps allows SMSF members more flexibility and capacity to enhance their retirement savings tax-effectively.

 

Pension Phase and Transfer Balance Cap

Transfer Balance Cap Increase The general transfer balance cap will increase to $1.9 million from $1.7 million. This cap limits the amount that can be transferred into the tax-free retirement phase of superannuation. The increase provides more flexibility for retirees to transfer higher balances into the pension phase.

  1. Minimum Pension Drawdown Rates The temporary reduction in minimum pension drawdown rates, introduced in response to the COVID-19 pandemic, will be extended for another financial year. This allows retirees to withdraw less from their superannuation pensions, preserving their retirement savings.

Adjustments in the pension phase and transfer balance caps are designed to aid SMSF members in maximizing their tax-free retirement benefits.

Table 2: Transfer Balance Cap Adjustments

DescriptionPrevious Cap (2023)New Cap (2024)Increase
Transfer Balance Cap$1.7 million$1.9 million+$200,000

Analysis:
This increase will benefit those nearing retirement, allowing for a larger amount of accumulated super to be transferred into a tax-free pension.

First Home Super Saver Scheme (FHSS)

The FHSS has been enhanced to better support first home buyers, an important consideration for SMSF members who might have family members looking to enter the property market.

Table 3: FHSS Maximum Releasable Amounts

DescriptionPrevious Maximum (2023)New Maximum (2024)
FHSS Maximum Releasable Amount$30,000$50,000

Analysis:
This enhancement is intended to improve the ability of individuals to save for a home via their superannuation, providing a higher limit which SMSF members can consider for their strategic planning.

 

Tax Scale Adjustments

With the objective of alleviating the tax burden, especially on middle-income earners, the government has restructured the tax scales.

Table 4: Adjusted Personal Income Tax Scales for 2024

Income BracketTax Rate 2023Tax Rate 2024Change
Up to $18,2000%0%No change
$18,201 – $45,00019%16%–        3%
$45,001 – $120,00032.5%30%–        2.5%
$135,001 – $180,00037%37% 
$190,001 and above 45% 

Analysis:
The adjustment to the upper threshold of the 32.5% tax bracket to $130,000 is designed to lessen the impact of bracket creep, providing relief and potentially higher disposable income for those near the top of this bracket.

Key Measures for SMSF Investors

Pension Caps

Increase in Transfer Balance Cap

  • The Transfer Balance Cap (TBC) will increase from $1.7 million to $1.9 million. This cap limits the amount that can be transferred to a tax-free retirement phase account.

Adjustments to Pension Drawdown Rates

  • The government will continue the temporary reduction in minimum pension drawdown rates by 50% for another financial year, providing retirees flexibility in managing their pension withdrawals.

First Home Super Saver (FHSS) Scheme

Increase in Maximum Release Amount

  • The maximum amount of voluntary contributions that can be released under the FHSS scheme will increase from $30,000 to $50,000. This change aims to assist first-time home buyers in accumulating a deposit.

Downsizer Contributions

Eligibility Age Reduction

  • The eligibility age for making downsizer contributions into superannuation will be reduced from 60 to 55. This allows more Australians to contribute proceeds from the sale of their primary residence into their superannuation.

Increased Contribution Cap

  • The downsizer contribution cap will increase from $300,000 to $350,000 per person, or $700,000 per couple.

Tax Scales

My SMSF Budget Review 2024 image

Personal Income Tax Cuts

  • Stage 3 tax cuts, which will commence in 2024-25, will reduce the 32.5% marginal tax rate to 30% for incomes between $45,001 and $200,000.

Adjustments to Tax Offsets

  • The Low and Middle Income Tax Offset (LMITO) will be extended for another year, providing a maximum offset of $1,080 for eligible individuals.

Key Measures for SMSF Investors

Relaxation of Residency Rules

  • The government will extend the central management and control test safe harbor from two to five years for SMSFs. This allows SMSF trustees who are temporarily overseas to maintain their fund’s complying status.

Introduction of Digital Auditing

  • The budget includes funding for the Australian Taxation Office (ATO) to develop and implement digital auditing tools, aiming to streamline SMSF audits and reduce compliance costs.

Conclusion

The 2024 Budget introduces several measures that will impact superannuation and SMSF investors. The increase in SG rate, adjustments to contribution caps, and enhancements to pension caps provide opportunities for SMSF members to boost their retirement savings. The changes to the FHSS scheme and personal tax rates aim to provide additional support to Australians, while the extension of temporary full expensing and improvements in digital services will benefit SMSFs directly. As always, it is crucial for SMSF members to stay informed and seek professional advice to make the most of these changes and optimize their retirement strategies.

Contact Us – Contact Us | SMSF Setup, SMSF Accounting and SMSF Loans (mysmsfproperty.com.au)

References

  1. Australian Government Budget 2024: Budget 2024 Overview
  2. Australian Taxation Office (ATO): Superannuation Changes
  3. Treasury Department: Detailed Budget Measures
  4. Australian Securities and Investments Commission (ASIC): Superannuation and SMSFs
  5. Financial Review: Budget 2024 Highlights

 

General Information Warning: This Budget Review is not advice it represents My SMSFs views on the Budget Changes for My SMSF Members and has been crafted to meet our members needs alone, without taking into consideration your personal circumstances or financial situation. Some of the details here within, may not be free of error. My SMSF takes no responsibility for errors in these documents sourced from external sources. Contact My SMSF for any SMSF setup or Cheap SMSF Administration Needs

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