Superannuation Budget Updates – Changes from 1 July 2021
A few changes to the superannuation world that applies from 1 July 2021 onwards, including contribution cap changes, information for employers, individuals aged 60 or over, and changes to work tests.
Superannuation Guarantee Contributions
From 1 July 2021, the SGC rate will increase from 9.5% to 10%. Employers will need to ensure their payroll systems will report this change from 1 July 2021 for all eligible employees. For those businesses using Xero with Single Touch Payroll, the changes will automatically apply.
The recent budget also brought along changes to who was eligible to receive the SGC. The changes, not yet legislated, propose from 1 July 2022 individuals earning less than the currently required $450 per month will be eligible to receive SGC on their earnings, regardless of the amount of earnings per month. This is great news for low income earners and it is estimated that around 300,000 individuals will benefit if passed.
If your business needs a payroll health check, please contact us!
Superannuation Contribution Cap changes from 1 July 2021
Superannuation contribution caps will increase from 1 July 2021 to the following:
Concessional cap will increase from $25,000 to $27,500 for the 2022 financial year
Non Concessional caps will increase from $100,000 to $110,000 for the 2022 financial year
Bring forward cap will increase from $300,000 to $330,000 to stay inline with the non concessional cap increase.
The total superannuation balance limit will increase from $1.6 m to $1.7 m as well. An individual’s non concessional cap is determined by their total super balance as at 30 June the prior year.
Concessional carry forward contributions will also be affected by the increase in the concessional cap from 1 July 2021.
Working out your contribution cap can be complex, and there will be tax consequences if you accidentally contribute above the cap, if you need help, contact us.
Reducing the age for Downsizer Contributions
Currently the downsizer measures apply to individuals aged 65 and over who meet eligibility criteria, allowing them to make a one off post-tax contribution of up to $300,000 each from the proceeds of selling their home. It’s a great opportunity for those individuals who no longer can contribute to boost their retirement savings.
The good news is that from 1 July 2022 the age requirement for the downsizer measures will decrease to 60 years of age over, allowing many more Australians to increase their superannuation benefits.
Work test changes
The work test has undergone some changes, let’s call them improvements, in the past couple of years. The budget measures brought along another improvement, making the work test almost non existent. The work test currently applies to individuals age 67 and over requiring them to work 40 hours in a 30 day period before they can make contributions.
The proposed changes will allow individuals aged 74 and under to be able to make non concessional contributions and salary sacrifice contributions without meeting the work test from 1 July 2022. That is great news but does make us ask why the work test will still apply for personal concessional contributions? Contributions that you make personally with your after tax money and claim a tax deduction in your personal tax return are exempt from these welcomed changes. Unfortunately to make this type of contribution you will still need to meet the work test.
This measure isn’t law yet so hopefully some positive changes come about and we can finally say goodbye to the work test.
We also hope for confirmation soon as to whether the bring forward rule for non concessional contributions will extend to age 74 inline with the proposed work test age change. Fingers crossed.