While the budget seems a little light on this time around, there were a couple of hidden gems for individuals and specifically around superannuation.

Removal of works test for super contributions for people aged 67-74

adLast year we saw a change in the age of people that need to apply the ‘works test’ from age 65 to 67 – and, this year we have seen it removed completely. What this means is any individual aged up to 74 years can make contributions to super but only salary sacrificed or non-concessional. 

There is still a works test that someone between 67-74 years old will need to meet for personal concessional contributions. Keeping this restriction for personal concessional just adds to the already complicated super rules, which seems unnecessary. I expect some lobbying against this part! 

It is also planned that this will allow individuals up to the age of 74 to use the non-concessional bring forward rule which is currently still restricted to individuals aged under 65. Last year we saw legislation get as far as parliament to bring this age up to age 67, but it has yet to be passed. With a bit of luck, this change will progress quicker this time around.  

Downsizer contributions age restriction to be lowered to age 60

Under the current rules someone who is over 65 who sells their family home can make a contribution of up to $300,000 to superannuation. This age limit is being reduced to age 60.

This change will expand on the opportunity for many people nearing retirement to get an extra boost into their superannuation to help self-fund their own retirement. This is a positive change and we look forward to discussing how these rules work with many of our clients.

Removal of lower threshold for Super Guarantee

Under the current rules, if an employee earned less than $450/month an employer had no requirement to pay them any super on these wages. The proposal is to reduce the cap and super must be paid for all employees, no matter how low their income is.

In the past, the removal of this threshold would have cost the employers a lot of time on administration, but with the improvements made via Single Touch Payroll and the Super Stream Systems, the administration costs for this have come down.

It is proposed to abolish this lower income cap from 1 July 2022. This means all employees should now be paid super guarantee.

Increase in First Home Saver Super Scheme 

The First Home Saver Super Scheme allows individuals to utilise the super environment to help them build up their deposit for their first home.  This scheme was introduced back in 2017 and was capped at $30,000 per individual but it proposed to increase to $50,000. 

These savings must come from voluntary contributions that an individual has put into super.   

Good news for members of Self Managed Super Funds

Currently members of SMSFs who were living overseas had to be very careful not to make contributions to their SMSF, as it could cause tax residency issues for the fund. In other words, it would risk the fund losing its concessional tax rate of 15%. Proposed changes announced in the budget will remove this issue for these members.

It doesn’t remove the tax residency tests completely though, and we still recommend any SMSF members or trustees who plan to live overseas [no matter how temporarily] contact us for further SMSF advice.

Legacy Pension Issues

For anyone that has a pre 2007 ‘legacy pension’[ie. Pre 2007 pensions], now is the time to revisit these and seek updated advice. While there aren’t many of our clients impacted by these older style pensions, it has been frustrating for those who have been because these accounts often have severe restrictions on accessibility and portability.

This budget is looking to address these inequities and allow you the chance to opt-out of these products. But the rules aren’t simple, and you will need to get personalised advice before looking to make any changes.

Key things that haven’t been touched in the budget and are still going ahead

  • Planned increases to the Super guarantee amounts – moving up to 10% from 9.5% on 1 July 2021
  • Indexation of contribution caps from 1 July 2021
    • Concessional cap to increase to $27,500
    • Non-concessional cap to increase to $110,000
  • Indexation of Transfer Balance Cap and Total Super Balance caps to $1,700,000 from 1 July 2021.
  • 50% COVID reduction of pension minimums to cease and pension minimums to return to normal limits from 1 July 2021.

Want to know how any of these proposals may apply to you? Call one of our team of super consultants on 1300BDEPOT or email us at oneplace@businessdepot.com.au to find out more.

Want more on the budget?

Information provided in this blog and on this website is general in nature and does not constitute financial advice. Every effort has been made to ensure that the information is accurate, but information may become outdated as legislation and new government announcements are made. Individuals should not rely on this information to make a financial investment decision as it does not take into account their personal circumstance. Before making any decisions, we recommend you consult a licensed advisor to take into account your particular financial situations and needs. 

businessDEPOT Financial Planning BNE and its advisors are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306