Superannuation Changes from 1 July 2022
About the author:
- Author name:
- By Terri Bradford
- Job title:
- Head of Wealth Management
- Date posted:
- 22 June 2022, 2:30 PM
The Enhancing Superannuation Outcomes Bill contains the following measures:
- Removing the $450 monthly minimum threshold for salary or wages to count towards the superannuation guarantee
- First home super saver scheme maximum releasable amount
- Reduced eligibility age for downsizer contributions
- Repealing the work test for superannuation contributions
Removing the monthly minimum threshold of $450
The $450-a-month threshold before an employee’s salary or wages count towards the super guarantee will be removed. This will expand the coverage of SG payments for eligible employees earning salary or wages that are less than $450 in a calendar month from an employer.
A win for casual and part-time employees, particularly younger Australians and women, who have inconsistent work hours.
First home super saver scheme
The maximum amount of voluntary contributions made over multiple financial years that are eligible to be released under the First Home Super Saver Scheme will increase from $30,000 to $50,000. The amendment does not alter the limit on the amount of voluntary contributions from any one financial year that are eligible to be released.
That is, the amount of eligible contributions that can count towards the FHSS maximum releasable amount for each financial year will remain at $15,000.
Being able to withdraw a higher total amount from superannuation as a deposit for a first home will no doubt create more interest from young people saving for a house, albeit the savings could be over a longer period given the annual maximum eligible contribution limit remains at $15,000.
Refer to our technical note “First Home Super Savers Scheme” dated March 2022 for a more detailed overview of the FHSSS and how the scheme works in practice.
Reduced eligibility age for downsizer contributions
The amendments allow individuals aged 60 and above to make downsizer contributions to their super from the proceeds of selling their home. This provides greater flexibility for older Australians to contribute to their super.
However, unless the individual meets a nil cashing condition of release, funds must be preserved within the super account until such time he or she can meet a condition of release. Age 65 is an automatic condition of release; age 60 is not. Section 292-102(1)(a) will be amended via regulations to allow for the reduction in age for this type of contribution to super.
Used in conjunction with a standard non-concessional contribution strategy, a single person or a couple can inject more into their superannuation prior to actual retirement. For example, a single person may be able to contribute up to $630,000 into super from age 60, which would include the maximum 3-year non-concessional contribution (NCC) limit of $330,000.
For a couple, it means up to $1.26 million combined could be contributed. The ability to contribute the downsizer contributions earlier at age 60, in addition to the maximum bring forward amount of $330,000 NCC, can make a significant difference to achieving retirement goals.
See our technical note “Downsizing Incentive for Seniors” dated March 2022 for more information on how the downsizer contribution rules work, particularly in relation to the Transfer Balance Cap and Centrelink issues.
Repealing the work test for super contributions
The Bill amends the ITAA 97 to allow individuals aged between 67 and 75 years to make salary sacrifice contributions to super without having to meet the 40-hour work test. The Bill also amends the ITAA 97 to allow individuals to make or receive non-concessional contributions (including under the bring forward rule).
Individuals aged between 67 and 75 who wish to make personal deductible contributions to super will still be required to meet the 40-hour work test. If an individual makes a deductible contribution and is unable to meet the work test or access the ’12-month exception’ rule, the contribution will remain a non-concessional contribution on the basis that no deduction can be claimed for it.
The 28-day rule will still apply for individuals turning age 75. That is, the contribution must be received into the super account on or before the day that is 28 days after the end of the month in which the member turns 75. If a person who is over age 75 makes a contribution within 28 days after the month in which they turned 75, there is no requirement to meet the work test.
The amended SIS Regulations state all member contributions that are non-deductible will be captured under this change. This means small business CGT contributions, spouse contributions and government co-contributions can be made without having to meet the work test if the individual is over age 67, up to age 75.
Retiring individuals can also continue using the 12-month ‘work test exemption’ window if total super balance is less than $300,000 as at the previous 30 June, and the person was gainfully employed for at least 40 hours over a consecutive period of 30 days during the previous financial year.
The amendment to the bring forward provision provides clarity that a person aged 74 with a total super balance of less than $1.48 million as at the previous 30 June can contribute up to $330,000 prior to attaining age 75.
The changes to superannuation are very welcome for retirees over age 67 up to age 75. The ability to contribute personal (non-deductible) contributions from 1 July 2022 will no doubt make a big difference to many individuals and couples in that age bracket.
Small business operators who have sold their business in the previous financial year may also be able to take advantage of the changes and contribute proceeds of business asset sales into superannuation. Always speak to your accountant and/or financial adviser in the first instance.
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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.