A number of legislative changes are are soon to come into effect that could have implications on your superannuation and may even provide you with the ability to contribute additional funds into your super. If you would like to more know about whether these changes affect you, continue reading the article below.
2022 Legislative Update
A number of the changes that are going to come into effect in 2022 were raised in the 2021 Budget by the Federal Government. However, these changes will not be legally passed and effective until 1 July 2022. The following changes have been suggested to significantly benefit Australian superannuation fund members.
Superannuation Guarantee Increase:
Under Commonwealth law, all employers are required to contribute a particular percentage of an employee’s ordinary time earnings into their super account. The first amendment includes an increase in the SG contribution from 10% to 10.5% which is due to come into effect at the beginning of the 2022 financial year. This is expected to continue increasing until it reaches 12% by 1 July 2025. This provides Australians with a greater potential to increase their super balances whilst they are working and maximise the returns as a result.
Superannuation Eligibility
Another change concerns who can contribute to super. Currently, if you are aged 18 and over you are required to earn $450 or more in a calendar month to be eligible for SG. This is legislated to change with the $450 minimum threshold due to be abolished from July 1 2022. This is a very positive change for young and low-income earning Australians as it enables them to accumulate super in line with the remaining workforce.
Removal of the Work Test
From July 1 2022, the work test currently required to make salary sacrifice contributions and personal contributions will no longer apply for individuals aged between 67 and 75. However, the work test will still need to be met (or an exemption granted) to claim a tax deduction for personal contributions.
Changes to Downsizer Contributions to Age 60
There are also changes concerning the downsizer contribution, which entails changing the required age from 65 to 60. This means that those aged 60 and over will be able to use the downsizer scheme which will enable them to make a one-off contribution into their super of up to $300,000 per person for the sale of a family home. This contribution does not affect any concessional or non-concessional contribution caps. This legislative change has the aim of encouraging more people to downsize sooner to allow for more family residences to become available in the housing market. To capitalise on this contribution, the contributing individuals must have lived in the residence for a minimum of 10 years.
Changes to Bring-Forward NCC eligibility
Currently, individuals younger than 65 are able to ‘bring forward’ up to three years of unused non-concessional contributions to the current year. This is due to change and will enable those aged between 67 to 74 to make NCCs using this rule. The Treasury has also provided that individuals who are nearing age 75 will also be able to make use of the bring-forward rules up to $330,000, subject to meeting other eligibility criteria.
First Home Super Saver Scheme (FHSSS)
The FHSSS is a scheme that enables individuals to save money for their first home by allocating the money to their super. This provides them with the benefit of the concessional tax treatment within the super instead of having the funds taxed at their marginal rate outside of super. Individuals can then apply to access the voluntary contributions they have made to enable them to purchase their first home. Currently, first home buyers can have a maximum of $15,000 of voluntary contributions in any one financial year with up to a total of $30,000 remaining accessible under the FHSS across all years.
This is set to change with the maximum amount that can be released increasing from $30,000 to $50,000 over all financial years, however, the $15,000 cap per financial year will remain in place. This is a significant win as it means the associated earnings and tax benefits under the scheme are increased for those wishing to purchase their first home.
If you would like further assistance to maximise your super balance whether you are at the beginning of your career or nearing retirement, please click the link to organise a 20-minute complimentary consultation with an EPG Wealth adviser.