2023-24 Australian Federal Budget highlights

From 1 July 2026, employers will be required to pay their employees' Superannuation Guarantee (SG) contributions at the same time as their salary and wages. 

The development of this measure will be supported by a consultation period led by Treasury and the ATO with industry and other interested stakeholders in the second half of the 2023, with the final design to be considered as part of the 2024-25 Federal Budget.

Mercer’s perspective

Mercer welcomes this measure, having advocated for many years for super to be paid at the same time as salary and wages. Receiving SG contributions earlier means they will be invested for a longer period. 

Payday Super is expected to substantially reduce unpaid (or underpaid) SG contributions, which the ATO estimated totalled $3.4 billion in 2019-20. Under Payday Super, unpaid super will be able to be identified much earlier, both by employees and the ATO.

In effecting the change, the Government has indicated that the 1 July 2026 start date was aimed at providing employers, superannuation funds, payroll providers and other parts of the superannuation system with sufficient time to prepare. 

Implications for individuals

• Mercer considers Payday Super to be a positive for individuals. It will make it easier for employees to keep track of their payments.
• It will also considerably enhance the ATO’s ability to detect non-payment of SG contributions, by making it much easier to check super liabilities reported to the ATO by employers against contributions reported to the ATO by super funds.
• The change will particularly benefit those in lower paid, casual and insecure work. This includes many women - who are more likely than men to have unpaid or underpaid super. 
• According to the Government, with Payday Super a 25-year-old median income earner currently receiving their super quarterly and wages fortnightly could be around $6,000 or 1.5% better off at retirement.

Implications for employers

• Before Payday Super comes into effect in three years’ time, employers will need to consider and plan for the implications of Payday Super for administrative and payroll processes, as well as cash flow. These implications will vary considerably between employers, with many (particularly medium and larger) employers already paying super contributions on pay-cycle or at least monthly.
• The SG penalty system will be one of the areas for consultation as the details of this measure are worked out. In Mercer’s view it is important that the system provides clear guidance to employers and enables the correction of any genuine payment errors without attracting disproportionate penalties. 
• In the meantime, the ATO will receive additional resourcing to help it detect unpaid super payments earlier and the Government will set enhanced targets for the ATO for the recovery of payments.
   

In February the Government announced that from 1 July 2025, individuals with a total superannuation balance over $3 million at the end of a financial year will be subject to an additional tax. Once implemented, this tax will be effected through an additional 15% tax on the earnings related to the portion of their balance over $3 million (without indexation). 

Implications for individuals 

Most individuals will be unaffected by the new tax. Budget estimates suggest that this measure will impact around 80,000 individuals in 2025–26, or approximately 0.5 per cent of individuals with a superannuation account, though this may increase into the future. 

For individuals with high superannuation balances, this tax introduces another threshold at which superannuation tax concessions are withdrawn as balances increase. Other existing thresholds include:

• $500,000, at which catch-up concessional contributions are no longer available.
• $1,480,000 ($1,680,000 from 1 July 2023) where access to the bring-forward of non-concessional contributions decreases.
• $1,700,000 ($1,900,000 from 1 July 2023) beyond which non-concessional contributions are no longer permitted, and the limit on amounts that can be transferred into tax-free pensions is reached. 

This new limit of $3,000,000 forms an additional threshold, resulting in the increased tax on earnings.

Individuals with high balance accounts may consider whether there is any action they can take to reduce the potential impact of the new tax. This might include contribution-splitting and making withdrawals, where permitted, for re-contribution into a lower-balance spouse account. 

Individuals will need to seek advice as to their own personal circumstances.

Implications for employers 

• While some senior employees may be affected and there may be some additional administration costs for DB employer sponsors, the tax is not expected to have an impact on employers unless some employees seek additional compensation for the increased tax.
   

• Following the Fair Work Commission’s earlier decision to provide an increase of 15% to award wages for aged care workers, the Government has committed in this budget to fund this increase in full, costing $11.3 billion over four years from 1 July 2023.

• A range of funding initiatives allowing more older people to continue to live in their homes and to extend the Disability Support for Older Australians Program.

• Implications to workers and the workforces are not significant and there is more that can be done to power the economy beyond the short term.  

• However, there are some bright spots: cheaper childcare bringing in more parents to participate in the workforce, efforts to close the gender pay gap, and culturally diverse participation in foundation and apprenticeship skilling.

• $3.5 billion to triple the bulk-billing incentive benefits for consultations for Commonwealth concession card holders and patients aged under 16 years of age.  

• $556.2 million over the next five years, along with $36.0 million ongoing, to strengthen Australia’s mental health and suicide prevention system.  

• Allowing many medicines to be dispensed in greater amounts, cutting the number of visits to a pharmacy and General Practitioner each year and saving $1.6 billion in out-of-pocket costs over 4 years.

• Additional funding of $358.5 million over 5 years from 2022-23 to deliver Medicare Urgent Care Clinics.
   

• The Government has consolidated prior improvements seen in October’s ‘mini-budget’ with improved revenues balanced against continued assistance to offset cost-of-living pressures, support to accelerate the green energy transition, support for the aged care and health care sectors and further commitments to defence spending.  

• With no significant risks to current inflationary trends from the budget, despite modest wage pressures forecast, there will be little concern from the Reserve Bank of Australia to reconsider monetary policy settings. As a result, capital markets will look past this budget and focus on the potential impacts of persistently high US inflation and other global growth dynamics as the next key drivers of risk sentiment for now.  

• From 1 July 2023, the super guarantee (SG) rate is being raised from 10.5% to 11%. This increase is part of a legislated plan to gradually lift the SG rate by 0.5% annually until it reaches 12% from 1 July 2025. 

• Workers eligible for the SG, including full-time, part-time and casual employees, will start to receive higher contributions from their employers as the latest increase to the SG rate starts to kick in.

• Although an increase of 0.5% to the SG rate may sound small, over the long term, even a small amount can have a meaningful impact on your super balance. To help illustrate this, you can use our Mercer Super online calculator to help you understand what your retirement income could look like. 

• The transfer balance cap increases by $200,000 to $1.9 million on 1 July 2023.

• The transfer balance cap was introduced on 1 July 2017 and serves to limit the total amount of super funds you can transfer into retirement pension accounts - with tax-free earnings - throughout your lifetime.

• The age pension (or other types of government payments) and pensions received from foreign super funds don’t count towards your transfer balance cap. 

• The general transfer balance cap undergoes an annual review, with indexation adjustments made in line with the consumer price index (CPI) in $100,000 increments.

• If you have super funds in retirement pensions (or have had since July 2017), you will have triggered the start of a personal transfer balance account. This account balance is available via myGov and enables you to monitor your adherence to your personal transfer balance cap, helping you avoid exceeding the limit.

• Due to the indexation, there is no universal cap applicable to everyone. Your personal transfer balance cap will depend on the financial year in which your transfer balance account commenced and any increments. 

• For the latest information, visit the ATO website on transfer balance cap.

• In response to COVID-19, the Australian Government temporarily reduced the minimum pension payment requirements for account-based pensions, transition to retirement pensions and similar products by 50% for the 2019/20, 2020/21, and 2021/22 financial years. 

• The temporary reduction was designed to reduce the need to sell investment assets to fund minimum drawdown requirements, providing Australians with flexibility during uncertain times.

• This measure was due to expire on 30 June 2022, however, as part of the 2022/23 Federal Budget, the Government extended the expiry date to 30 June 2023.

• From 1 July 2023, the Government’s standard minimum drawdown rate will apply to all account-based pensions (allocated pensions and annuities and market-linked pensions and annuities).

• For the latest information, visit the ATO website on minimum pension payment amounts.