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Good news!

Superannuation rules are relaxing.

February 2022 brought welcome news that Federal Parliament passed laws containing a raft of superannuation measures announced in last year’s Budget.

These new changes relax laws to the work test, downsizer contributions and exempt current pension income calculations. This brings new opportunities for Australians to utilise superannuation and build long term wealth. The laws come into effect 1 July 2022.

Highlights

01

Partial removal of the “work test” for those aged between 67 and 75

One measure removes the requirement for an individual aged between 67 and 75 to meet the work test to make or receive a non-concessional or salary sacrifice contributions into superannuation. In brief, the work test requires being gainfully employed at least 40 hours in a 30 day period.

Note: The work test or recent retiree exemption will continue to be required for individuals of this age who wish to claim a tax deduction for their personal contributions.

02

Extending the non-concessional bring forward age limit

The cut-off age to make non-concessional contributions using the bring forward rule is increasing from 67 to 75. This will allow individuals in this age range, who were previously not able to use this rule, to potentially contribute up to $330,000.

Note: The existing provision restricting the maximum bring forward amount where an individual’s total super balance is $1.48m or greater continues to apply.

03

Downsizer contributions available from age 60

The eligibility age for making downsizer contributions will reduce from 65 to 60 years of age. Downsizer contributions allow up to $300,000 of proceeds from the sale of an individual’s principal place of residence, owned for at least 10 years, to be contributed into super.

This will allow more Australians the consideration of “downsizing to homes that better meet their needs to increase the supply of larger homes for young families”.

Furthermore, “from 1 July 2018 to the end of January 2022, 36,800 individuals have contributed $8.9 billion to their superannuation under this measure,” said Assistant Treasurer Michael Sukkar.1

All other existing eligibility requirements remain in place.

04

Increasing the maximum voluntary contributions for the First Home Super Saver Scheme

These changes also increase the limit on the maximum amount of voluntary contributions that can be made under the First Home Super Saver Scheme from $30,000 to $50,000.

05

Improving flexibility of calculating exempt current pension income

The bill also amends the Income Tax Assessment Act 1997 to allow superannuation trustees to choose their preferred method of calculating exempt current pension income when they have member interests in both accumulation and retirement phases for part, but not all, of the income year.

This is particularly helpful for Australians with self-managed superannuation funds (SMSF) to manage fund tax outcomes.

06

Removing the minimum monthly threshold for super guarantee contributions

The bill also removes the $450 per month income threshold under which employees do not have to be paid superannuation guarantee by their employer.

“The $450 threshold for super was a discriminatory relic in our system. We promised to remove it, and we’ve delivered.”2

(Senator Jane Hume, 2022).

With this coming into effect 1 July 2022, it’s important you discuss these changes with your Navigate financial adviser and consider what new opportunities are available to achieve your financial outcome.

Feel free to contact myself or one of the team at Navigate Financial Group who are here to support your financial decision making, leading you confidently into your financial future.

References/ footnotes:

1. The Hon Michael Sukkar MP Assistant Treasurer, Minister for Housing Minister for Homelessness, Social and Community Housing. (2022, February 10). Parliament passes legislation to drive investment and support first home buyers. [Joint media release]. Retrieved from https://ministers.treasury.gov.au/ministers/michael-sukkar-2019/media-releases/parliament-passes-legislation-drive-investment-and

2. Senator Hume, Jane. [@SenatorHume]. (2022, February 10). Today we delivered on our promise to remove a discriminatory, inequitable relic – the $450 threshold to receive super. From July [Tweet]. Twitter. https://twitter.com/SenatorHume/status/1491663129498976259