A staggering amount of people will be getting paid superannuation for the first time after minimum salary thresholds have been discarded as a result of Parliaments recently passed bill. This change is just one of several amendments being made to superannuation in 2022, which will come into effect alongside the upcoming financial year, as of the 1st of July.
The proposed superannuation changes are set to positively impact Australia’s low-income earners, more specifically part-time workers, and women, presenting them with an opportunity to potentially grow their nest egg in preparation for retirement.
The partial removal of the work test for those aged 67-75
The existing work test, or the ‘work text exemption for recent retirees’, will no longer be required as of July 1st for individuals aged 67-75 who make/receive salary sacrifice or non-concessional contributions. However, both mentioned tests will still be mandatory for individuals in that age bracket who wish to claim a tax deduction for their personal contributions.
According to the bill that has been passed in parliament, the new rules state the work test can be met during any period in the financial year of contribution, here lies a vast difference from the rules at present in which a work test must be met prior to contributing.
The existing maximum age limit on making voluntary contributions, being within 28 days of the end of the month in which the member reached the age of 75, remains unchanged under the latest amendments, with the exception of the downsizer contribution.
Extension of the Non-Concessional contributions bring-forward age limit
As per the new superannuation changes, the cut-off age for making non-concessional contributions which is currently 67 years of age, will be further increased to the age of 75. The revised age limit means that many people aged 67 to 74 years (inclusive) who previously were not able to utilise the bring forward non-concessional contribution cap amount due to their age, may now do so as of July 1st of this year.
Eligibility age for downsizer contributions reduced to 60
Individuals that are 60 years of age or above at the time of which the contribution is made, are now able to make downsizer contributions from July 1st. Whilst this element of superannuation has been amended, the maximum downsizer contribution amount of $300,000 per eligible person, along with other eligibility requirements, remain unchanged.
Maximum First Home Super Saver Scheme withdrawal increased to $50,000
The First Home Super Saver Scheme (FHSSS) is a system that allows first home buyers to save part of their home purchase deposit in the concessionally taxed superannuation environment. The maximum amount for this scheme will be increased from the standing limit of $30,000 (plus notional earnings, less tax), to $50,000 (plus notional earnings, less tax).
Removal of the minimum monthly threshold for Superannuation Guarantee (SG) contributions
Effective as of the 1st of July, there were no longer be a minimum monthly threshold for an eligible employee to qualify for Superannuation Guarantee contributions. With this being the case, in the circumstance that an eligible employee earns less than $450 in a calendar month, there is now an obligation on the employer’s end to make Superannuation Guarantee contributions.
Improving flexibility of current exempt pension income calculation
In the case that a super fund is running both retirement phase pensions and accumulation interests within a year, fund trustees will now be granted greater flexibility in terms of having the ability to choose between the ‘segregated’ and ‘proportional’ methods when calculating the fund’s tax liabilities.
This in-turn will simplify the compliance obligations as in this given scenario, trustees could choose to apply the proportionate (unsegregated) method for the for the entirety of the income year based on a single actuary’s certificate.
Yield Financial Planning is Here to Help
If you are inclined to apply these changes to your financial plan but are unsure how to do so effectively, don’t hesitate to contact our team of industry professionals to seek assistance in regard to reaching your financial goals.