The SMSF Association has confirmed the low-rate cap and a number of other superannuation framework elements will no longer be relevant after 1 July as the final increase in preservation age will occur at this time.
The preservation age from 1 July will be 60, meaning it will be the same for all Australians regardless of when they were born.
SMSF Association technical manager Fabian Bussoletti noted the significance of this event.
“[Now] it will no longer be necessary to consider differing individual preservation ages, based on someone’s date of birth, when determining whether an individual is able to access superannuation benefits,” Bussoletti told the industry body’s members in a blog post today.
Further, he pointed out it will also no longer be necessary to specifically manage a superannuation member’s situation if they were born between 1 July 1960 and 30 June 1964 as was previously required for this cohort as the preservation age applicable to them was below 60.
“As a result [of the change to the preservation age], the low-rate cap, that is, $235,000 in the 2023/24 financial year, and 15 per cent (plus Medicare levy) tax rate, previously applicable to lump sum withdrawals made by individuals in this cohort, will no longer be relevant – that is, they have essentially become redundant,” he noted.
“Similarly, if we consider individuals in receipt of a superannuation income stream, we’d be familiar with the fact that those aged between their preservation age and 60 currently benefit from a 15 per cent tax offset on any taxable portion of their income stream payments.
“Once again, from 1 July 2024, this tax offset will no longer be relevant unless of course the income stream is being received due to the member’s permanent incapacity, that is, as a superannuation disability benefit, or is a death benefit pension where both the deceased member was and the beneficiary still is under age 60.”
In addition, he said strategies involving transition-to-retirement income streams (TRIS) will be more straightforward when the 2025 income year commences.
“The tax treatment of pension payments from a transition-to-retirement income stream, which of course can only be commenced once an individual reaches their preservation age, will also be easier to remember,” he acknowledged.
“Where a TRIS is commenced from 1 July 2024 onwards, all pension payments will be entirely tax-free.”
