Changes to Superannuation from 1st July 2022

Australian Super Advises the changes to take place.

What's changing?

The 2021 Federal Budget outlines the Government’s economic forecasts along with a range of initiatives aimed at fast tracking Australia’s economic recovery following the Covid-19 pandemic, which the Government indicates has been much better than expected. In the superannuation space the focus has been on delivering more for members, particularly women and those in part-time and casual employment.

Importantly, the Federal Government has maintained the legislated increase to the superannuation guarantee, which will increase by 0.5% to 10% on 1 July 2021. This is great news, as we know the rise in the minimum rate of super payments will help support a better retirement for millions of Australians. So, what are the key changes to superannuation and what could they mean for you?

Key proposed changes to super:

Removal of $450 monthly income threshold for super contributions

  • Increase in the withdrawal limit for First Home Super Saver Scheme (FHSSS)

  • Removal of super contribution ‘work test’ for those aged between 67 and 74

  • Transfer of unclaimed super to KiwiSaver accounts

  • Lower age threshold for super downsizer scheme

  • Legacy product conversions

It’s important to remember that these measures will need to be legislated before they come into effect. This also applies to the super changes announced in last year’s budget, which are still being debated in Parliament.

Proposed changes that may impact people still working Removal of $450 monthly income threshold:

The Government will remove the $450 minimum monthly income threshold, meaning all workers, regardless of how much they earn, will be entitled to receive employer super payments.

The $450 monthly threshold prevents an estimated 300,000 workers, 63% of whom are female, from receiving mandatory employer super contributions.

This is an issue AustralianSuper has advocated for on behalf of members over many years and is a very welcome step to ensure part-time workers and those with multiple jobs earning less than this amount per month, get a much-needed boost to their super savings.

Proposed start date: 1 July 2022 Higher withdrawal limit for the First Home Super Saver Scheme:

The maximum withdrawal from the First Home Super Saver Scheme (FHSSS) will increase from $30,000 to $50,000.

This scheme allows people to make voluntary contributions to superannuation to save for their first home. The current caps on these contributions are $15,000 a year and $30,000 in total.

Under the proposed changes, voluntary contributions into a super fund will be allowed by a post-tax contribution or through salary sacrificing, up to a maximum of $50,000 in total. For couples, both individuals will be able to utilise their caps up to a maximum of $100,000. This scheme relates to voluntary contributions only. First home buyers cannot withdraw any part of their compulsory super savings – that is, super contributions made on their behalf by their employer.

Proposed start date: 1 July 2022 Abolishing the work test for those aged between 67 and 74 years:

The current work test requires a person to be employed for at least 40 hours in a consecutive 30-day period, during the financial year, before any super contributions can be accepted – Concessional or Non-Concessional.

Under the proposed changes, the existing work test will be abolished on 1 July 2022, however the work test will continue to apply where an application to make personal deductible contributions is made.

Existing contribution cap arrangements continue to apply.

Proposed start date: 1 July 2022 Transfer of superannuation to the KiwiSaver Scheme.

The Government will provide $11 million over four years from 2021-22 (and $1 million per year ongoing) to the Australian Taxation Office to administer the transfer of unclaimed superannuation money directly to KiwiSaver accounts (the New Zealand equivalent of Australian superannuation funds).

Proposed start date: 1 July 2021

Changes that may impact retirees:

New age threshold for downsizers.

The eligibility for downsizer contributions will be lowered from age 65 to 60, allowing retirees to contribute up to $300,000 to their super following the sale of their home. Couples may be eligible to contribute up to $300,000 each.

It’s important to note that proceeds from the sale of the home that are transferred to super accounts, will be included in the asset test for the Age Pension.

The principal place of residence remains exempt from the asset test.

Proposed start date: 1 July 2022

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