Changes to super out of the 2021 federal budget

Changes to super out of the 2021 federal budget

While the budget seems a little light on this time around, there were a couple of hidden gems for individuals, specifically around superannuation.

 

1. Removal of work test for super contributions for people aged 67-74

Last year saw a change in the age of people that need to apply the ‘work test’ from age 65 to 67. This year, we have seen it removed completely. This means that any individual aged up to age 74 can make contributions to super (whether they be concessional or non-concessional contributions).

One area to note though, currently the ability to use the non-concessional bring forward rule (up to 3 x $100,000) is still restricted to individuals aged under 65.

 

2. Downsizer contributions age restriction to be lowered to age 60

Under the current rules someone who is over 65 who sells their family home can make a contribution of up to $300,000 to superannuation. This age limit is being reduced down to age 60.

This change will expand on the opportunity for many people nearing retirement to get an extra boost into their superannuation to help self-fund their own retirement.

 

3. Removal of the lower threshold for Super Guarantee

Under the current rules, if an employee earns less than $450/month, an employer had no requirement to pay them any super on these wages. The proposal is to reduce the cap and ensure that super payment is compulsory, no matter how low someone's income is.

In the past, the removal of this threshold would have created a lot of extra work for employers. However, systems like Xero and Keypay now make it easier than ever to automatically pay employee super.

It is proposed to abolish this lower income cap from 1 July 2022.

 

4. Increase in First Home Saver Super Scheme

The First Home Saver Super Scheme allows individuals to utilise the super environment to help them build up their deposit for their first home.  This scheme was introduced back in 2017 and was capped at $30,000 per individual but it proposed to increase to $50,000.

These savings must come from voluntary contributions that an individual has put into super.

 

5. Good news for members of Self Managed Super Funds

Currently, members of SMSFs who were living overseas had to be very careful not to make contributions to their SMSF, as it could cause tax residency issues for the fund. In other words, it would risk the fund losing its concessional tax rate of 15%. Proposed changes announced in the budget will remove this issue for these members.

It doesn’t remove the tax residency tests completely though, and we still recommend any SMSF members or trustees who plan to live overseas (no matter how temporarily) contact us for further advice.

 

6. Key things that haven’t been touched in the budget and are still going ahead

  • Planned increases to the Super guarantee amounts – moving up to 10% from 9.5% on 1 July 2021
  • Indexation of contribution caps from 1 July 2021
  • Concessional cap to increase to $27,500
  • Non-concessional cap to increase to $110,000
  • Indexation of Transfer Balance Cap and Total Super Balance caps to $1,700,000 from 1 July 2021.
  • 50% COVID reduction of pension minimums to cease and pension minimums to return to normal limits from 1 July 2021.

 

Final thoughts

If you are confused about all the detail and just want to know what the budget means for you, your super or your business reach out to Link Advisors for a chat about your situation.

 

Disclaimer: Information provided in this blog and on this website is general in nature and does not constitute financial advice. Every effort has been made to ensure that the information is accurate, but information may become outdated as legislation and new government announcements are made. Individuals should not rely on this information to make a financial investment decision as it does not take into account their personal circumstance. Before making any decisions, we recommend you consult a licensed adviser to take into account your particular financial situations and needs.