Author: Emma Partenza, Manager, TAG Financial Services
(This article updated on 28 February 2022)
Welcomed news was received overnight with the long-awaited passing of the 2021 Federal Budget superannuation proposals.
Treasury Law Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021 passed through both houses of Government on 10 February 2022.
The Bill has receive Royal Assent and the announcements will apply from 1 July 2022.
A recap of the 2021 Federal Budget Announcements now passed include:
Removing the work test for voluntary contributions
The work test, which required an individual to work for 40 hours in 30 consecutive days to be able to contribute to super, will be removed. This means that anyone under the age of 75 will be able to make salary sacrifice and non-concessional contributions irrespective of their employment situation.
Individuals aged 67 to 74 years (inclusive) will still have to meet the work test to make personal deductible contributions.
Removing the work test requirement when making non-concessional or salary sacrifice contributions will simplify the superannuation contribution rules and make it easier for older Australians to save for their retirement through superannuation.
Increasing the bring forward rule for non-concessional contributions for anyone up to age 75
Previously this was only available to member’s aged less than 67 years. It allows members to access future caps and bring forward 3 years’ worth of non-concessional contributions into a financial year, without breaching the NCC cap. Eligibility to utilise this, however is still dependent on a member’s total superannuation balance (at the previous 30 June) being less than $1,700,000. It is understood that a member can utilise the full 3 year bring forward NCC cap (provided they were not current in a bring forward period) just prior to their 75th Birthday (even though contributions cannot be made post age 75).
The bring forward NCC cap will allow older Australian to contribute monies into a tax effective investment vehicle and will be a great tax planning and strategy tool in evening up balances between spouses (this will be covered in the next blog and is part 2 of our spouse contribution strategies series).
Reducing the eligibility age for downsizer contributions
Downsizer contribution age eligibility will be reduced from those over 65 to those over 60.
The downsizer contribution allows eligible individuals to make a one-off, post-tax contribution of up to $300,000 per person following the disposal of a principal place of residence, to their superannuation fund. These contributions are not counted towards the non-concessional cap.
Removing the $450 per month Super Guarantee (SG) Threshold
The current $450 per month minimum income threshold will be removed, under which employees do not have to be paid SG contributions.
SG payments to employees earning less than $450 per month are expected to commence from 1 July 2022.
First Home Super Saver Scheme
The maximum release amount under this scheme will be increased from $30,000 to $50,000. Assisting members to buy their first home and save faster with the concessional tax treatment of superannuation.
Exempt Current Pension Income
SMSF Trustees will now have the choice on their preferred method of calculating exempt current pension income where they have members who have both accumulation and retirement phase benefits (for either part or the full financial year).
What’s Not Included
The 2021 Federal Budget Announcement’s yet to be legislated include relaxing residency requirements and an amnesty for legacy pension products.
All above announcements, have received Royal Assent and are applicable from 1 July 2022.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2022. Please do not reproduce without the expressed written consent of the author.