With a new financial year already underway, many are asking; “what has changed in regards to superannuation and pension legislation, and what should I be aware of?”. We have outlined the important changes below:
- Super Guarantee Rate
Workers who are eligible to receive Superannuation Guarantee Contributions (SGC) can expect an increase from 10% to 10.5% on 1 July 2022 in line with stepped increases to 12% by 2025, supporting a better retirement for millions of Australians.
- Abolishing the Work Test for people 67-74
The current work test requires you to be employed for at least 40 hours in any consecutive 30-day period during the financial year, before any super contributions are accepted – before tax or after-tax. As of 1 July 2022, the work test has been abolished. Existing contribution cap arrangements will continue to apply; however, you will still be obliged to meet the work test if you wish to claim a tax deduction on your voluntary contributions.
- Removal of $450 monthly income threshold
The $450 minimum monthly income threshold has been removed, meaning that regardless of how much you earn, if working part-time, you will be entitled to receive employer SG payments. However, your working children who are less than 18 of age, need to work more than 30 hours per week to be entitled to be paid super, unless they are covered by a workplace agreement that states otherwise.
Retirees/Social Security Recipients
- New age threshold for Downsizers
The eligibility for Downsizer Contributions will be lowered from age 65 to 60, allowing you to contribute up to $300,000 to your super following the sale of your home. Couples will be eligible to contribute up to $300,000 each. It is important to note that proceeds from the home sale that are transferred to super accounts will be included in the asset test for the Age Pension when you reach the eligible age. The principal place of residence will remain exempt from the asset test.
- Minimum Drawdown Rate
The Government has extended the measure introduced in March 2020, allowing retirees to withdraw half the normal minimum amount from their super. Retirees can now leave more money in their super without having to pay additional tax on their earnings. This extension applies to the end of June 2023.
- Social Security & Deeming Rates frozen for two years
The Department of Social Services has released the indexed Social Security rates and thresholds for 1 July 2022, refer to the Centrelink website for a new guideline or contact your Financial Adviser at Alman Partners for further information.Minister for Social Services, the Hon Amanda Rishworth MP, has announced a commitment to freezing social security deeming rates at their current levels for a further two years. The freeze applies to all people receiving social security payments. The lower deeming rate will remain frozen at 0.25% and the upper rate will remain at 2.25% for the next two years to 30 June 2024. From 1 July 2022, the lower deeming rate applies to financial investments up to the threshold amounts of $56,400 for singles and $93,600 for couples. The upper deeming rate applies for financial assets above these thresholds. The Government indexes deeming rate thresholds every 1 July, in line with increases in the cost of living.
Measures outside of Superannuation
- Low to Middle Income Tax Offset (LMITO)
The Government will introduce a $420 cost of living tax offset for people earning less than $126,000. This is linked to the existing tax offsets and thresholds. Individuals already receiving LMITO will have this increase added to their existing offset.
- Cost of Living Payment
A one-off, tax-exempt payment of $250 will be paid to eligible pensioners, welfare recipients, veterans, and concession card holders. More than half of those who will receive this payment are pensioners.
- Home Ownership
The number of guarantees under the Home Guarantee Scheme will increase to 50,000 per year for 3 years from 2022-23, and then 35,000 per year ongoing to support homebuyers to purchase a home with a lower deposit.
If you require further information or clarity on any of the above changes, don’t hesitate to contact your Financial Adviser.
Veronika Holubova (MFinP, GradCertFP, ADFP, DipFP) 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.