With the last few years leaving us exhausted with what feels like bad news after bad news, it is a refreshing change to share some positive advancements from the passing of the Treasury Laws Amendment Bill 2021 this month.
The key aim of the bill was, as it states in the name, to ‘Enhance Superannuation Outcomes for Australians and Helping Australian Businesses Invest’ 1, which is certainly reflected in the substantial amendments to existing legislation. Let’s have a look at some of the key changes and how they may financially benefit you.
Removal of the min. $450p.m. Income Requirement to receive Super Contributions
Currently, if you earn less than $450 a month your employer has no obligation to pay superannuation contributions on earnings. Did you know this affects around 300,000 Australians not receiving a super boost, despite contributing to the workforce, and that it is made up of predominantly women?1 From 1 July 2022, all employers must pay superannuation contribution on all earnings which is huge … next step for SG contributions to continue on paternal leave?
First Home Super Saver increased from $30,000 to $50,000 from 1 July 2022
If you are looking to purchase your first home, saving some or all of your deposit via your superannuation may have tax reduction benefits, to assist in reaching that savings goal in a shorter time frame. The initial bill allowed the release of $30,000 in eligible voluntary contributions made to superannuation over multiple financial years, which has now increased to $50,000 – potentially savings individuals thousands more in tax.
Reduction in the Downsizer Contribution eligibility to age 60
If you have owned your own home for more than 10 years and decided it is time to downsize, you may be eligible to contribute up to $300,000 from the proceeds of your home sale into superannuation. This type of contribution does not impact other superannuation caps, with the intention of allowing individuals to get more money into a tax-effective environment. Current legislation requires individuals to be age 65 and over, however, from 1 July 2022 the eligibility age reduces to 60.
Super Contribution eligibility increased to age 75
Now this one is a little more fiddly. Currently, legislation requires individuals between the ages of 67 and 75 to meet the work test (working at least 40 hours in a 30 consecutive day period), in order to contribute your ‘after-tax’ money into superannuation. This condition has now been removed, and not only do these individuals have the ability to access the annual non-concessional cap of $110,000, but they can also utilise the ‘bring forward rule’ (but not bringing forward years beyond age 75) potentially allowing contributions up to $330,000 in one year.
Unfortunately, the legislation did not extend the removal of the work test to Personal Concessional Contributions (‘before-tax’ monies), however, we cannot grumble with the significant benefit this could pose for those over age 65 and no longer working.
Whilst legislation is never perfect, and there is more work to be done, this is certainly another step in the right direction of improving the financial lives of many more Australians who can benefit from these amendments.
It is important to note that the above summary does not include the comprehensive eligibility criteria and individuals should seek financial advice to seek further guidance on how this may be relevant to your personal circumstances.
1https://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/r6800_ems_edcf3975-1c1e-42b6-9dc3-4c44af3ca906/upload_pdf/JC003903.pdf;fileType=application%2Fpdf
2https://www.financialstandard.com.au/news/450-super-threshold-scrapped-179791579
Kelsey Dent (DipFP, ADFP, BA Hons [Bus,Mgt]) is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Note: This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person or entity. Accordingly, to the extent that this material may constitute general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. This is not an offer or recommendation to buy or sell securities or other financial products, nor a solicitation for deposits or other business, whether directly or indirectly.