On the July 1st, 2022, various changes to super contribution will come into effect. These changes could benefit many individuals particularly retirees. We’ve provided a summary of the key changes below.
Super guarantee $450 income threshold removed.
The removal of the $450 income threshold means all employers are now entitled to receive superannuation contributions regardless of their income level, except for employees under 18 working less than 30 hours a week.
This change is particularly beneficial for low-income workers and those with multiple part-time jobs, as it allows them to build their retirement savings overtime. However, certain exceptions exist, and for most other employees, this change is a significant step forward in improving retirement outcome for all Australians.
Work test requirements dismissed.
Individuals aged between 67 to 74 with a total super balance of less than $1.7 million can now make non-concessional or salary sacrificed contributions into their super without meeting the work test. However, meeting the work test is still necessary to claim a deduction on contributions. Overall, these changes offer greater flexibility and opportunities for older individuals to contribute to their superannuation and plan for retirement, potentially resulting in a more comfortable retirement with tax benefits if the work test is met.
After-tax contribution under bring-forward rules extended.
The non-concessional contribution bring-forward rule currently only available if you are aged 67 or less has been extended to individuals who are aged under 75. All the other requirements remain unchanged with the maximum contributions shown below.
If the total super balance on June 30 of the previous year is:
– Less than $1.48 million, you have a three-year bring forward period and a contribution cap of $330,000
– Between $1.48 and $1.59 million, you have a two-year bring forward period and a contribution of $220,000
– Between $1.59 and $1.7 million, you cannot use the bring forward rule but have an annual contribution cap of $110,000
– Greater than $1.7 million, you are not eligible
First Home Super Saver scheme boost.
The First Home Super Saver scheme allows you to save money for your first home within your super fund. Originally the release of contributions for a first home purchase under this scheme was capped at $30,000, this will now be increased to $50,000 starting from 1st July 2022. Aside from this, the limit on annual contributions remains the same at $15,000.
Down sizer contribution eligibility reduced.
Homeowners aged 60 or over now have an additional option to boost their superannuation savings with the introduction of the down-sizer contribution. This contribution was previously only available to individuals aged 65 or over, but has now been expanded to include those aged 60 and above. By contributing up to $300,000 from the sale of their home into their super, individuals can further enhance their retirement funds. However, it’s important to note all other eligibility criteria remain the same, including the requirement that contributions must be made within 90 days of receiving the sale proceeds.
If you are a homeowner at the age of 60, you now have another option to grow your super. The down sizer contribution, currently eligible for individuals aged 65 or over has now been reduced to those aged 60. At the age of 60 you will be able to contribute up to $300,000 from the sale of your home into your super. All other eligibility criteria remain the same including the requirement that contributions are to be made within 90 days of receipts of the sale proceeds.
A choice to exempt current pension income (ECPI).
ECPI refers to income generated by assets held by a self-managed superannuation fund to support retirement-phase income streams. This income is exempt from income tax providing significant tax benefits for SMSF members.
Recent changes to the law have given SMSF trustees greater flexibility in how they calculate ECPI. Trustees can now choose between obtaining an actuarial certificate to calculate ECPI for the entire year, or using the actual income for the parts of the year when the fund held 100% in retirement pension accounts. This change allows trustees to select the method that best suits their fund’s circumstances and can potentially reduce the administrative burden and costs associated with obtaining an actuarial certificate.
If you would like to know more about the super contribution changes and how they apply to your circumstances, feel free to contact our friendly team at Wilson & Assoc Chartered Accountants for assistance.
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Disclcaimer: The information provided within this article is general information only. None of the comments in these notes are intended to be advice, whether legal, financial product or professional. You should obtain specific advice regarding your particular circumstances from a tax or legal professional.
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