30 Aug 2022
Super changes that could affect you from 1 July 2022
A number of changes to the superannuation system came into effect on 1st July 2022 which could create opportunities for Australians of all ages.
Here’s a rundown of what you need to know:
- More people are now eligible for contributions from their employer, under the Superannuation Guarantee (SG), as the minimum income threshold of $450 per month has been removed.
- Work test requirements for those aged 67 to 75 have been softened and now only apply to people who want to claim a tax deduction on voluntary super contributions they may be making.
- More people are able to contribute up to three years’ worth of non-concessional super contributions in the same financial year, with the cut-off age increased from 67 to 75.
- More people are eligible to make tax-free downsizer contributions to their super from the proceeds of the sale of their home, with the eligibility age reduced from 65 to 60.
- First home buyers, who meet certain criteria, are able to withdraw an additional $20,000 in voluntary contributions from their super, to put toward a deposit on their first home.
How you could benefit from the changes
1. Compulsory (SG) contributions from your employer
Under the government’s Superannuation Guarantee you previously needed to earn at least $450 per month to be eligible for compulsory super contributions from your employer. However, from 1 July 2022 that minimum income threshold has been removed.
This means that even where an eligible employee earns less than $450 in a calendar month, there is now an obligation on the employer to make contributions. Find out more about the Super Guarantee and what you’re likely to receive if you’re eligible.
2. The work test
Prior to 1 July 2022 people aged 67 to 74 could only make voluntary contributions to their super if they had worked at least 40 hours over 30 consecutive days in the financial year, unless they met an exemption.
From 1 July 2022, the work test no longer applies to contributions you make under a salary sacrifice arrangement with your employer, or personal contributions for which you don’t claim a tax deduction.
However, the work test will still need to be met if you wish to claim a tax deduction on personal contributions.
Under the new rules, the work test can be met in any period in the financial year of the contribution. This is different to the previous rules, where the work test must have been met prior to contributing.
3. Non-concessional super contributions
Prior to 1 July 2022 those under the age of 67 at the start of the financial year could make up to three years of non-concessional super contributions under bring-forward arrangement.
From 1 July 2022, the cut-off age will increase to 75.
The bring-forward rules allow you to make up to three years of non-concessional contributions in a single year if you are eligible. This means you could put in up to three times the annual cap of $110,000, meaning you could top up your super by $330,000 within the same financial year.
How much you can make as a non-concessional contribution will depend on your total super balance as at the end of the previous financial year. Find out more about bring-forward rules and how your total super balance plays a part.
4. Downsizer contributions
The age at which Australians can make tax-free contributions to their super from the proceeds of the sale (or part sale) of their home has been reduced from 65 to 60. (Note, there is no upper age limit for downsizer contributions and no requirement to meet the work test.)
The maximum downsizer contribution amount of $300,000 per eligible person and other eligibility requirements remain unchanged.
For couples, both spouses can make the most of the downsizer contribution opportunity, which means up to $600,000 per couple can be contributed toward super. Find out more about downsizer contributions and what rules apply.
5. The First Home Super Save Scheme (FHSSS)
The First Home Super Saver Scheme (FHSSS) aims to provide a tax-effective way for eligible first home buyers to save for part of a deposit on a home.
Under the scheme, prior to 1 July 2022, you could withdraw voluntary contributions (plus associated earnings/less tax) from your super fund, subject to a maximum withdrawal of broadly $30,000 for each eligible individual.
From 1 July 2022, this withdrawal cap has been increased to broadly $50,000 for each eligible individual. Find out more about the FHSSS and what eligibility criteria applies.
Other important things to note about your super
- If you exceed concessional and non-concessional super contribution caps, additional tax and penalties may apply. Find out more about super contribution types, limits and benefits.
- The value of your investment in super can go up and down, so before making extra contributions, make sure you understand, and are comfortable with, any potential risks.
- The government sets general rules around when you can access your super, which typically won’t be until you reach your preservation age (which will be between 55 and 60, depending on when you were born) and meet a condition of release, such as retirement.
Where to find help
Depending on what you want to do it is strongly recommended that you speak with your financial adviser for more information. Please contact PSK Private Wealth today.
©AMP Pty Ltd. First published March 2022
Disclaimer: PSK Financial Services Group Pty Ltd (ABN 24 134 987 205) trading as PSK Private Wealth and Employee Representatives of PSK Advisory Services Pty Ltd trading as PSK Private Wealth are all representatives of AFS licensee, PSK Advisory Services Pty Ltd (ABN 30 008 587 595) AFSL #234656. This document contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
If you have any questions or your personal circumstances have changed please do not hesitate to contact your financial adviser.
Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
