As part of the 2021–22 Federal Budget, the Government announced some promising changes to Superannuation rules. The Government has introduced the Treasury Laws Amendment (Enhancing Superannuation for Australians and Helping Australian Businesses Invest) Bill 2021, which sets out the proposed changes. One of the main intentions of the Bill is to make it easier for older Australians to contribute to their superannuation. From the view of a Financial Adviser, the proposed changes are welcomed and present a raft of superannuation opportunities for individuals. Here we will discuss a few of the proposed changes.
Removal Of the Work Test
If you are aged 67 and want to make voluntary member contributions to your super, you must currently meet the work test criteria (or work test exemption). The work test requires to you be gainfully employed for a minimum of 40 hours over a consecutive 30-day period during a financial year. The Bill seeks to abolish the work test for individuals aged between 67 and 74 for non-concessional contributions and salary sacrifice contributions from 1 July 2022. If approved, this will also extend to government co-contributions and receiving spousal contributions. Unfortunately, at this stage the Bill does not intend to remove the work test for personal contributions which you can claim a tax deduction (Personal Deductible Contributions).
Extending the Bring Forward Rule to Under Age 75
Currently, a member of a super fund under the age of 67 can ‘bring forward’ two years of non-concessional contributions and make a total contribution of $330,000 into their super fund (subject to their total super balance). The Bill is seeking to extend this age so the bring forward rule can be used for members who are 74 or younger at the start of the financial year from 1 July 2022. For those members turning 75 in the financial year they have until the 28th day of the month after their birthday to employ the bring forward rule.
Reducing the Downsizer Contribution Age
Currently, individuals selling their primary residence may be eligible to make a downsizer contribution to super of up to $300,000. To make a downsizer super contribution you must satisfy several conditions, one of which requires you to be aged 65 or over at the time of making the contribution. The Bill seeks to lower the downsizer contribution age from 65 to 60 from 1 July 2022. It is important to note that all other existing conditions still need to be satisfied prior to making a downsizer contribution.
Getting More into Super
Assuming the bring forward rule age is extended and the downsizer rule age is reduced individuals will have significant opportunities to make large lump sum contributions into their super funds. An individual aged between 60 and 74 would have the ability to contribute up to $630,000 to their super, and a couple would have the ability to contribute $1,260,000. This assumes legislation is passed and all other conditions are satisfied.
Superannuation legislation is forever changing and can be hard to keep up with. As always there is a devil in the detail and conditions that will still need to be met if the changes become law. If you think these proposed changes may benefit your situation talk to a Financial Advisor today and get on the front foot.
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.