27 Feb 2022
New super rules to benefit older Aussies and low-income earners
Budget 2021 superannuation enhancements passed by Parliament
The Federal Parliament recently passed new legislation that will bring into effect changes to super. The changes were first proposed in the May 2021 Federal Budget and are set to benefit people in their 60’s and 70’s, as well as low-income earners.
The following changes will come into effect from 1 July 2022:
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Partial removal of the work test for those aged 67 to 75.
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Non-concessional contributions bring-forward age limit increased to age 75.
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Downsizer contribution eligibility reduced to age 60.
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Increase in the maximum First Home Super Saver Scheme withdrawal amount to $50,000.
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Removal of the monthly minimum threshold for Superannuation Guarantee (SG) contributions.
Some of these amendments require supporting regulations (or amendments to existing regulations) to become effective. These regulations are yet to be introduced. PSK will continue to monitor the progress of this and will provide updates as soon as additional details become available.
1. Partial removal of the work test for those aged 67 to 75.
Please note that enabling regulations will be required to give effect to this measure.
The existing work test requires you to be in paid work for a minimum of 40 hours over a consecutive 30-day period during a financial year before you’re able to make voluntary super contributions.
The work test and the work test exemption will no longer be required from 1 July 2022 for individuals aged 67 to 75 who make or receive salary sacrifice or non-concessional contributions.
The work test and exemption will still be required for individuals in that age range who wish to claim a tax deduction for their 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 current rules, where the work test must be met prior to contributing.
If you’ve made a contribution and have not met the work test, you will be ineligible to claim a tax deduction for the contribution. The contribution will be classified as non-concessional and will count towards your non-concessional contribution cap. The existing upper age limit on making voluntary contributions (within 28 days of the end of the month where the member reached age 75) remains unchanged, with the exception of when making downsizer contributions.
2. Non-concessional contributions bring-forward age limit increased to 75 years.
The cut-off age for accessing the bring-forward rule will be increased from 67 to 75 years. This means that many individuals aged 67 to 74 years (inclusive) who were not previously able to bring forward non-concessional contributions cap amounts due to their age, may now do so from 1 July 2022.
Existing restrictions on the full availability of bring forward contributions will continue to apply to people with a total super balance over $1.48 million.
3. Eligibility age for downsizer contributions reduced to age 60.
Individuals aged 60 or older (no upper age limit) at the time the contribution is made can now make downsizer contributions from 1 July 2022. The maximum downsizer contribution amount of $300,000 per eligible person and other eligibility requirements are unchanged.
4. The maximum First Home Super Saver Scheme (FHSSS) withdrawal amount increased to $50,000.
The FHSSS is a scheme that allows first home buyers to save part of their home purchase deposit in the concessionally taxed superannuation environment. The maximum FHSSS withdrawal amount will be increased from 1 July 2022 from the current limit of $30,000 (plus notional earnings, less tax) to $50,000 (plus notional earnings, less tax).
5. Minimum monthly threshold for Superannuation Guarantee (SG) contributions removed.
From 1 July 2022, there will no longer be a minimum monthly threshold for an eligible employee to qualify for SG contributions. 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 SG contributions.
General Advice Warning - 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.
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.
