Finally…. some very good news
Finally…. some very good news
When the government released it’s 2021 Budget back on 11 May, it included some exciting announcements relating to superannuation.
At last, the announcements have seen the light of day in the form of the Taxation Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021. That is a mouthful of a title – I will avoid using it in future and will simply refer to it as the Bill.
The Bill, introduced into the House of Representatives on 27 October 2021, begins its legislative journey to (hopefully) becoming law in the not-to-distant future.
While not addressing all the Budget announcements, the Bill does include some important measures that will be of interest to both young, and more senior Australians.
Let’s look at a couple of the more interesting measures included in the Bill.
Employers are currently obliged to contribute 10% of their employees’ salary to superannuation, where an employee earns more than $450 in a month. There are some exceptions to this requirement, such as where an employee is under 18 years of age and works 30 hours per week or less.
The 2021 Budget included a proposal to abolish the $450 monthly salary threshold.
As a result, once legislation is passed, employers will be required to contribute 10% of their employees’ salaries to superannuation even if they earn less than $450 per month.
First Home Super Saver scheme
The First Home Super Saver scheme enables people to access voluntary contributions they have made to super, and the associated earnings on those contributions, to use towards the purchase of their first home.
The maximum contributions that may be released is currently $30,000.
From 1 July 2022, it is proposed the maximum limit be increased to $50,000.
The current annual limit of contributions that may be released of $15,000, will remain.
First introduced in July 2018, Australians aged 65 or over have had the opportunity to contribute up to $300,000 from the proceeds of the sale of an eligible residence to superannuation without being constrained by contribution caps or having to meet a work test.
While there have been no changes to the basic eligibility requirements to make downsizer contributions, the age limit for making downsizer contributions will reduce from 65 at the time the contribution is made, to 60.
This change will allow more people to maximise their contributions to superannuation for their retirement.
The reduced age limit is due to apply from 1 July 2022.
Removal of the work test
Under current law, a person is unable to make voluntary contributions to superannuation between the ages of 67 and 75 unless they meet a work test or are covered by the extended work test exemption.
Voluntary contributions are personal contributions, both tax deductible and non-deductible, and contributions made under a salary sacrifice arrangement.
Mandated employer contributions (i.e. superannuation guarantee contributions) and downsizer contributions can be made without meeting the work test.
The work test requires a person to be gainfully employed or self-employed for at least 40 hours, worked within 30 consecutive days, in the financial year in which they intend to contribute.
There are many occasions when those aged between 67 and 75 may wish to make additional contributions to superannuation but are unable to because they have not met the work test.
The very good news is that, subject to the successful passage of the legislation, the work test requirement will be removed for salary sacrifice and personal (non-concessional) contributions from 1 July 2022.
However, the work test will remain a requirement for anyone wishing to claim a tax deduction for their personal contributions.
Three-year bring forward opportunity
Many people aged 66 or younger can bring forward up to three years of non-concessional contributions and potentially contribute up to $330,000 in a single year.
Along with removing the work test requirement, the legislation recently tabled in Parliament will see the age limit for accessing the three-year bring forward cap increased to 74.
While still unclear at this stage, there may be diminishing access to the three-year bring forward cap for those approaching their 75th birthday.
This is not an exclusive coverage of all the measures contained in the Bill but it addresses some of the key announcements from the Budget that will be of particular interest to many readers.
We are following the progress of the legislation closely and will provide further updates as the Bill advances through the legislative process.