The 2021 Federal Budget announced some significant changes to superannuation in the year ahead.
Here are the key points:
Superannuation Changes
Removing the work test for voluntary contributions
The work test has required an individual to work for 40 hours in 30 consecutive days to be able to contribute to super. This change means that anyone under the age of 75 will be able to make personal concessional and non-concessional contributions irrespective of their employment situation.
Removing the work test requirement when making non-concessional or salary sacrifice contributions will simplify the superannuation contribution rules and make it easier for older Australians to save for their retirement through superannuation.
Individuals aged 67 to 74 years (inclusive) will still have to meet the work test to make personal deductible contributions.
It is expected to commence from 1 July 2022.
Reducing the eligibility age for downsizer contributions
Downsizer contribution age eligibility will be reduced from those over 65 to those over 60.
It is expected to commence from 1 July 2022.
The downsizer contribution allows eligible individuals to make a one-off, post-tax contribution of up to $300,000 per person following the disposal of a house, to their superannuation fund. n eligible dwelling. These contributions are not counted towards the non-concessional cap.
Relaxing residency requirements for SMSFs
The residency requirements for SMSFs and small APRA-regulated funds will be relaxed by:
- extending the central control and management test safe harbour from 2 years to 5 years; and
- removing the active member test.
It is expected to commence from 1 July 2022.
This measure will allow SMSF members and small APRA fund members to continue to contribute to their superannuation fund whilst temporarily overseas, ensuring parity with members of large APRA regulated funds.
Removing the $450 per month Super Guarantee (SG) Threshold
The current $450 per month minimum income threshold will be removed, under which employees do not have to be paid SG contributions.
It is expected to commence from 1 July 2022.
Ability to convert legacy pension products
Individuals will have the temporary option to exit and convert from a specified range of legacy retirement products (include market-linked, life-expectancy and lifetime products in SMSF) into more flexible and contemporary retirement products, for a 2 year period.
The products covered need to have been first commenced before 20 September 2007 from any provider (including an SMSF), but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme.
It is expected to commence from 1 July 2022. It is expected to commence from 1 July 2022.
Social security and taxation treatment will not be grandfathered for any new products commenced with commuted funds, and the commuted reserves will be taxed as an assessable contribution.
More information at: budget.gov.au
If you have any questions, please contact us on 03 9886 0800 or via email.
Superannuation Strategies Online Seminar 2021, 10 August | 9am – 4.30pm. Register now for our online seminar and hear about how the changes (both proposed and approved) will impact your clients.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2021. Please do not reproduce without the expressed written consent of the author.