When the 2021 budget was handed down, a number of changes were proposed to superannuation. Legislation changes generally take some time and recently, most of these were passed, albeit they don’t apply until 1 July 2022.
Work test requirements
For those over aged between 67 and 74 wanting to contribute to super, there is a work test requirement. That test will be removed from 1 July except for anyone wanting to make a personal tax-deductible (concessional) contribution where the test will still apply.
Bring forward of personal (non-concessional) contributions – NCCs
The NCC cap is $110,000 per annum and an option to bring forward years two and three caps into the current year is available. However, this option hasn’t been available for those over 65. In addition to removing the work test, the ability to bring forward the next two financial years’ caps into the current year has now been extended for those up to age 75. The explanatory guide though contradicts this as the intention is not to allow a 75-year-old to use their caps in the following two years when they would not be able to contribute other than a downsizer contribution.
Downsizer contributions
The eligible age drops from 65 to 60 for those looking to sell their principal residence and use some of the proceeds to increase their super balance. This remains one of the least talked about types of contributions. There are a few eligibility criteria to tick off but it is not subject to any upper age limit. Alos note that there is actually no requirement to ‘downsize’ despite the name and it is not limited by how much you already have in super. There will be retirees who be eligible to contribute up to $1.26m using both an NCC bring forward and downsizer contribution strategy. And over two financial years, that could be $1.48m. The rules are complex so always seek advice before implementing any contribution strategies. For those though sitting on a lot of equity in their house but without a great deal of liquid assets, this remains one of the great untapped options.
First home super saver scheme (FHSSS)
Where a request for a FHSSS determination is made to the Commissioner on or after 1 July 2022, a member will be able to release up to $50,000 of eligible contributions (plus a deemed earnings amount) under the FHSS Scheme to purchase their first home. Currently the maximum release amount is $30,000 plus deemed earnings. However, there is no change to the annual voluntary contribution limit, which will remain at $15,000. This means that a person needs to make eligible contributions over at least four years to take maximum advantage of the scheme.
Removing the threshold for compulsory super guarantee (SG) contributions
At present, for employees earning less than $450 in a calendar month, their employer is not required to pay superannuation guarantee (SG) on their behalf. From 1 July 2022, the threshold will be removed and employers will be required to pay SG on earnings less than $450 in a calendar month.
For more information contact us on 03 8610 6396
Keep Wealth Partners Pty Ltd (AFSL 494858)
This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from a financial planner who can consider if the strategies and products are right for you.
