A number of changes and reforms relevant to superannuation were announced by Treasurer Josh Frydenberg in the 2021/22 Federal Budget.
Importantly, each of the announced changes are proposed to commence from 1 July 2022 and need to be legislated before they take effect and therefore give rise to no changes in the near term.
The key superannuation changes are:
- Scrapping the $450 per month earnings threshold for workers to be eligible for the superannuation guarantee
- Expanding the First Home Super Saver Scheme (FHSS) to increase the maximum withdrawal from $30,000 to $50,000
- Extending eligibility for the downsizer scheme to individuals aged 60 – from the previous age of 65 – allowing people to make a one-off post tax contribution to their super worth up to $300,000 after selling their home
- Repealing the work test for voluntary non-concessional and salary sacrificed contributions to super for those aged 67 to 74 years. Individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions. The current work test requires Australians aged 67 to 74 to work for 40 hours within 30 consecutive days during a financial year to make voluntary contributions to their super (both concessional and non-concessional).
More on the key superannuation changes:
1. Removal of the $450 monthly income threshold
The $450 monthly threshold prevents an estimated 300,000 low paid workers, 63% of whom are female, from receiving mandatory employer super contributions.
Removal of this threshold means this cohort of workers will from 1 July 2022 be eligible to receive superannuation guarantee (SG) payments from their employer.
2. New threshold for First Home Super Saver Scheme
The Government proposes to increase to $50,000 the maximum amount of voluntary contributions aspiring home buyers can take from the First Home Super Saver Scheme.
This scheme allows people to make voluntary concessional (before-tax) and non-concessional (after-tax) contributions to superannuation to save for their first home. At present these contributions are capped at $15,000 a year and $30,000 in total.
Under the proposed changes, contributions to a super fund will be allowed by salary sacrifice up to a maximum of $50,000. Where there is a couple involved, both individuals will be able to utilise their caps up to a maximum of $100,000.
This scheme applies only to voluntary contributions. First home buyers cannot withdraw any part of the compulsory component of their superannuation savings that have been contributed by their employer.
3. Changes to the Downsizer Scheme
This change to an existing measure will allow those nearing retirement who downsize their family home to contribute $300,000 to superannuation ($600,000 per couple) at age 60, down from 65.
Such contributions will be classified as a non-concessional (post-tax) contribution and are allowed in addition to existing super rules and caps (i.e. it is not counted towards the caps) including the total super balance cap of $1.6 million (due to rise to $1.7 million on 1 July 2021).
The measure is exempt from the work test, but it is not exempt from the $1.6 million (also rising to $1.7 million on 1 July 2021) transfer balance cap (which limits the amount of money individuals can put into a pension phase account where investment earnings are tax free).
4. Work test abolished for those aged between 67 and 74 years
The government intends to abolish the work test, which requires those aged between 67 and 74 to be gainfully employed for at least 40 hours over 30 consecutive days during a financial year before concessional or non-concessional superannuation contributions can be made.
This will enable individuals aged 67 to 74 years (inclusive) to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution caps, however they will still have to meet the work test to make personal deductible contributions.
The existing $1.6 million cap on lifetime superannuation contributions will continue to apply (increasing to $1.7 million from 1 July 2021). The annual concessional and non-concessional caps will also continue to apply.
Other super related announcements:
The Government will further invest in supporting stronger consumer outcomes for super members by providing $9.6 million over four years to the Australian Prudential Regulation Authority (APRA) and $1.6 million over four years to Super Consumers Australia to enhance supervision, transparency and enforcement.
In addition to superannuation measures in this year’s Federal Budget, there were also changes impacting social security, aged care and taxation.
Previous Budget measures scheduled to come into effect on 1 July 2021
The Your Future Your Super measures proposed in last October’s budget – which include a requirement to staple individuals to their current superannuation fund and apply performance testing to many funds – and at this time remain scheduled to come into effect on 1 July 2021.
However, as the legislation is still before Parliament, the final scope of the proposed reforms and their implications and dates for implementation is not yet known.
New thresholds on 1 July 2021 for some existing measures
While not part of the 2021 Federal Budget announcements, it is worth noting that the thresholds for a number of existing super measures will increase from 1 July 2021.
These include increases to the amount individuals can voluntarily contribute to super through either salary sacrifice or by making a non-concessional contribution.
The key super rates and thresholds provide that for 2021/22:
- the concessional contributions cap is $27,500, up from $25,000
- the non-concessional contributions cap is $110,000, up from $100,000
- the general transfer balance cap is $1.7 million, up from $1.6 million
While there is no specific mention in the budget of the SG increase schedule, the legislated superannuation guarantee increase of 0.5% to 10% is set to apply from 1 July, 2021.
We’re here to help
If you have questions about these proposed changes, and how they could affect you, our Client Service Managers are available to help. We remain dedicated to support you so that you are able to make the most of your future.
\If you have any questions or need assistance, please contact us by calling 1800 060 312 Monday to Friday between 8am and 8pm (AEST) or emailing email@example.com
Legal Super Pty Ltd ABN 37 004 455 789 is the Trustee of legalsuper ABN 60 346 078 879 and holds Australian Financial Services Licence No. 246315 under the Corporations Act 2001.
This is general information only and should not be considered to be personal advice. You should not make decisions concerning your superannuation arrangements solely based on the information contained on this website.
This information has been prepared without considering your personal objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation and needs. You are responsible for your own investment decisions and should obtain individual tailored financial advice whenever necessary.
Investments update - July 2022
In the context of recent widely publicised financial market falls and rising economic uncertainty, legalsuper's investment returns remain strong relative to other funds.
Get ready for super changes from 1 July
There are some important changes to super that will take effect from 1 July 2022.