Super is changing, and from 1 July a number of measures from the most recent and previous budgets will come into effect. These changes will impact both employers and employees, and anyone planning for retirement.
- Super guarantee is increasing to 10.5% on 1 July
- Removal of the $450 monthly income threshold for super guarantee
- Changes to the work test for those aged between 67 and 74
- Expansion of the bring-forward rule
- Lowering downsizer contribution age from 65 to 60
super guarantee is increasing to 10.5 % on 1 July
Super guarantee rates for all employees will increase to 10.5% on 1 July. This increase is part of the planned increase of super guarantee contributions to 12% over the next four years. Future increases are scheduled as follows:
|Financial year||Super guarantee rate|
To prepare for this increase, check that your payroll systems will automatically update the super guarantee to the new rate of 10.5%. This increase takes effect [from wages paid to employees] from 1 July 2022 onwards. For example, if a payroll fortnight ends after 1 July the employer is obliged to pay 10.5% on ordinary earnings for the entire fortnight.
The increase to the super guarantee rate will impact employees differently depending on their remuneration package. For those with salary packages inclusive of superannuation, their net income may be offset by the increase in superannuation, resulting in an equal reduction in their salary.
removal of the $450 monthly income threshold for super guarantee
The current super guarantee rules allow for employees to earn $450 per calendar month before their employee is obliged to pay superannuation contributions on their earnings. From 1 July, this minimum threshold ends and all ordinary earnings will attract super guarantee contributions.
changes to the work test for those aged between 67 and 74
From 1 July 2022, those aged between 67 and 74* will no longer need to satisfy a work test to make voluntary superannuation contributions. The new rules allow for the following types of contributions:
- Non-concessional [non-tax deductible]
- Salary sacrifice
- Voluntary employer contributions
- Lifetime CGT cap contributions
- Personal injury payment contributions
Importantly, while the above contribution types no longer require a work test, members who make personal deductible contributions between the ages of 67 and 74, will still need to satisfy the work test requirement.
*Super funds can accept contributions for a member while they are under 75 [and up to 28 days after they turn 75].
expansion of the bring-forward rule
From 1 July 2022 a super fund member can trigger the bring-forward rule in a financial year where they are under age 75 at the start of the year.
The bring-forward rule allows you to access your non-concessional caps for a three-year period and use them in the current year or over a shorter period.
This change opens up possibilities for retirees who wish to increase their superannuation holdings where they were previously excluded due to age limits.
lowering downsizer contribution age from 65 to 60
From 1 July 2022 the eligibility age for the downsizer contribution will reduce to 60. This will allow super members who wish to downsize sooner to contribute up to $300,000 from the sale of their family home.
For those looking to retire or retirees looking to downsize, this change represents a potential super contribution of $630,000 [or double for a couple] by combining the downsizer contribution and bring-forward rule for non-concessional contributions.
From 1 July 2022 $50,000 of eligible contributions plus deemed earnings can be released to purchase their first home under the first home super saver [FHSS] scheme. Previously, the maximum release amount was $30,000 plus deemed earnings.
we’re here to help!
businessDEPOT Financial Planning SYD and its advisors are Authorised Representatives of Count Financial Ltd ABN 19 001 974 625 AFSL No. 227232. businessDEPOT Financial Planning BNE and its advisors are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. The information contained within this blog and video does not consider your personal circumstances and is of a general nature only. You should not act on it without first obtaining professional financial advice specific to your circumstances.