After much anticipation, some key superannuation legislation was passed through parliament last week and we are now eagerly awaiting Royal Assent. Here’s a brief summary of what it all means.
‘Bring-Forward’ rule now available for members aged 65 up to 67
Last year we saw the requirement to meet the works test removed for individuals aged between 65 and 66 when making a contribution, but this change to the rules wasn’t extended to the bring-forward rule.
Previously, the bring-forward rule allows a member who’s under age 65 at the start of the financial year to utilise the non-concessional cap bring forward rule. This allows the member to contribute up to 3 years worth of non-concessional contributions cap in 1 year [ie. the annual cap on non-concessional contributions is $100,000 but in one year you could potentially make a contribution of $300,000 by using the cap for the following 2 years].
This rule has now been extended to members who are under age 67 on 1 July at the start of the relevant financial year to trigger the bring-forward period from 2020/21 onward, and comes into effect from 1 July 2020.
Therefore, if you are currently under age 67, you will have the opportunity to make a contribution of $300,000 to your superannuation fund before end of June 2021. However, it’s important to note there are strict criteria depending directly on your personal circumstance to be taken into account before making super contributions. These include your age, the total super balance, and if you have previously triggered the bring forward rule.
In addition, it is important to note that the non-concessional contribution cap is increasing from 1 July 2021, so depending on your personal circumstances and when you are turning age 67, you might be better off waiting until the new financial year – in which you could contribute up to $330,000 after 1 July 2021.
Given the complexity of the super rules, we recommend you discuss your options and personal situation before making any contributions to superannuation with a licensed financial adviser to ensure you get the best outcome for you.
In addition to the above change, if you accessed your super under the COVID-19 Early Release stimulus program, from 1 July 2021 to 30 June 2030 you can re-contribute the amount you withdrew under this arrangement to superannuation without it counting towards your non-concessional cap.
SMSF Members increase to 6
After a number of attempts to get this through, the bill to increase the maximum members of a Self Managed Super Fund [SMSF] from 4 to 6 has been approved!
We still recommend you seek personalised advice before you rush into adding members to your SMSFs as there are many legal consequences to be considered, but this does create flexibility and opportunities for some families regarding their SMSF plans.
Removal of ‘Excess concessional contributions’ charge
In the past if you exceeded your concessional contribution cap, you were charged a penalty rate of interest as well as taxed at your marginal rate on the excess contribution.
This change in legislation will mean that from 1 July 2021 the penalty interest will no longer apply to excess contributions.
You will, however, still be taxed at your marginal rate on excess contributions. This is a welcome change as many of our clients exceed their caps due to factors outside of their control, so this measure means that they will no longer be penalised for this.
If you would like to find out more about what these changes mean for you give a call on 1300BDEPOT or email us at firstname.lastname@example.org to speak to an advisor.
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.
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