Over the past few years, there have been many reforms and refinements to Australia’s superannuation sector. A number of these changes were announced in the Federal Budget in 2021 and are due to come into effect in July 2022.
To maximise these opportunities, it is important to make an appointment with your Tribel Advisor to discuss your personal situation and ensure you take advantage of these changes that could potentially add significantly to your retirement savings.
The legislated changes include:
• An increase to the Superannuation Guarantee rate.
• An increase in the voluntary contribution amounts made to super that can be released under the First Home Super Saver Scheme (FHSSS).
• Removal of the ‘work-test’ requirement for non-concessional contributions (NCCs) and salary sacrifice contributions.
• Extending eligibility to make NCCs under the ‘bring-forward’ rule.
• Extending eligibility to make downsizer contributions.
These amendments may provide a range of new financial planning opportunities for people within various age groups. Many of these opportunities will benefit specific age groups and are usually geared towards older Australians as they get closer to the golden age of retirement.
All Ages – Superannuation Guarantee changes
For most employees this change will be automatic and relates to the employer contribution which currently sits at 10%. As of 1 July 2022, this will increase to 10.5%. The Federal Government has proposed that this rate will increase incrementally over the next 4 years to 12% by 2025.
In addition to this, the current income threshold of $450 per month will be removed. This will be a benefit for part time employees who currently miss out on compulsory super contributions because of low hours and low wages.
All Ages – First Home Super Saver Scheme
The First Home Super Saver Scheme allows a superannuation member, who is a first home buyer, to access up to $30,000 plus deemed earnings, of voluntary contributions they have made to their superannuation fund. As of July 2022, the maximum amount of super that could be released over multiple financial years has now been increased from $30,000 to $50,000. Keep in mind that the amount of voluntary contributions you can make to put towards this measure has not changed and is still $15,000 per annum, so if you’re looking to get to the full $50,000 you will need to plan this out over a 4 year period.
This is good news for young Australians trying to get their foot into the property market. For more information on this scheme and other opportunities for first home buyers we’ve written an article to further guide you on this topic.
Ages 67-75 – Scrapping of the ‘work test’ requirement
Currently, if you are over 67 years old and choose to make voluntary contributions to your super, the ‘work test’ requirement is used to ensure you meet the criteria and are able to prove that you have been gainfully employed for at least 40 hours or more in any 30-day period within the financial year.
As of July 2022, this ‘work test’ requirement will be removed for non-concessional contributions (NCCs) and salary sacrifice contributions to super. This change will allow individuals aged from 67 to 75 to continue to make non-concessional contributions, however it is still subject to existing contribution cap of $1.7 million on lifetime contributions.
Under 75’s – Introduction of the bring forward rule
The ‘bring forward’ rule allows you to bring forward your non-concessional contribution limits from future years and use them in a shorter time period. This is great for those who are close to retirement and want to put extra money into their super in preparation. This can also be used for large sums such as an inheritance or sale of an asset.
If you were under 67 as at July 2021 and haven’t yet triggered this rule, you can make non-concessional contributions if your total super balance (TSB) was less than $1.7 million as at 30 June 2021. The cap varies depending on your TSB – up to $330,000 if your TSB was less than $1.48 million TSB; and up to $220,000 if it was between $1.48 million and $1.59 million; up to $110,000 if your TSB is between $1.59 and $1.7mil.
As of July 2022, the eligible maximum age for those who can take advantage of this rule will be lifted from 67 to 75.
Over 60’s – more access to downsizer contributions
A downsizer contribution relates to people making one-off, post-tax contributions of up to $300,000 to their super from the proceeds of selling their family home. While this already exists, from July 2022 the eligible age to take advantage of this will change from 65 to 60. This change is aimed at older Australians to encourage them to downsize earlier and potentially make a lifestyle change that will give them a better quality of life and less maintenance of a large house and land. This in turn would also benefit younger families by freeing up stock of larger houses for growing families who are attempting to upsize.
Downsizer contributions can be made even if you are ineligible to contribute due to age, work status or total super balance, as long as you are 60 years or over at the time of contribution and that you have owned your home for at least 10 years.
Please keep in mind that if you are selling your home and wish to take advantage of this change – you need to ensure settlement is not before April as the contribution must be made within 90 days of change of legal ownership so you will need to plan carefully as to when you put your house on the market.
Contact your Tribel Advisor to review your superannuation and plan your future
The rule changes could give retiree couples who sell their home and are eligible to make downsizer contributions the ability to contribute up to $657,500 each ($27,500 + $330,000 + $300,000) excluding any catch-up concessional contributions.
With all the changes that have taken place over the past few years, along with these changes for 2022, it is hard to keep track to ensure you are making the most of your super, setting you up for a comfortable retirement. While all these changes have been designed with the best interest of Australians and their futures paramount, how they will impact you will depend on your personal circumstances, life stage and goals. We recommend you get in touch with your local Tribel Advisor to discuss these changes before July to ensure you don’t miss out.
