Several key super changes came into effect on 1 July 2022 regarding superannuation contributions. These changes create opportunities for all, young and old, to grow their retirement savings.
What are the changes?
- The Superannuation Guarantee (SG) rate will increase to 10.5% p.a. for all
- The $450 minimum income threshold for SG contributions, will be removed
- Those under 18 must continue to work more than 30 hours in a week to be entitled to SG contributions
James Dolahenty, Director in our Sydney office said, "a consideration employers need to get right prior to their first payroll run in just over a month's time, is how they will be implementing the 0.5% increase. It is important to review employment contracts and ascertain whether the employee's package is inclusive of, or excluding superannuation guarantee.
These discussions should happen now at management level so you can make the decision on how you will handle the increased SG, and then communicate this to your staff."
- Individuals up to the age of 74, will no longer need to meet a work test to make voluntary, non-deductible, contributions
- Individuals up to the age of 75, with a total super balance under $1.7 million, will have the opportunity to make large non-concessional contributions (possibly up to three years' worth) in a single year
- The minimum age to make downsizer contributions will reduce to 60, allowing more individuals to use the proceeds from the sale of their home, to fund their retirement
- Under the First Home Super Scheme (FHSSS) eligible individuals will have access to an extra $20,000 of voluntary contributions to fund a home deposit.
How can you benefit from these changes?
The Work Test
Currently, if you are aged 67 to 74, you can only make voluntary contributions to super if you have worked at least 40 hours over 30 consecutive days in the financial year, or you satisfy the recently retired test.
From 1 July 2022, this work test will only apply to you if you wish to claim a tax deduction for the voluntary contributions you make to your super. If making personal deductible contributions, from 1 July 2022, you will be able to meet the work test at any time in the financial year.
Currently, only if you were under the age of 67 on 1 July of the financial year, can you make non-concessional contributions which exceed the annual $110,000 non-concessional contributions cap. Currently, the bring-forward rules allow you to make up to $330,000 (i.e. three years' worth of non-concessional contributions), depending on your total super balance on 1 July.
From 1 July 2022, the cut-off age to access the bring forward rules will increase to 75.
Currently, you can only make a downsizer contribution if you are 65 or older at the time of the contribution and have satisfied the other eligibility requirements.
From 1 July 2022, the minimum age will reduce to 60. All other eligibility rules remain unchanged and the maximum amount of downsizer contributions that can be made remains at $300,000 per person or $600,000 per couple.
If you are selling your home and expect to receive the sale proceeds close to the end of this financial year, please contact your Moore Advisor to discuss the timing of a downsizer contribution and the potential to boost other contribution opportunities in 2022-23.
For example, if you get the timing right, you may be able to combine a downsizer contribution with the bring forward rules to contribute up to $630,000 to your SMSF, in one year. As a couple this could present a one-off opportunity to boost your retirement savings by $1.26m.
First Home Super Saver Scheme (FHSSS)
Currently the FHSSS allows you to withdraw a maximum of $30,000 of voluntary contributions (plus associated earnings/less tax) from your super fund to fund the deposit of a new home.
From 1 July 2022, the maximum amount that can be withdrawn will increase to $50,000 meaning each eligible person will be able to withdraw an additional $20,000. All other eligibility rules remain unchanged.
Also unchanged is the maximum amount of contributions that an individual can make each year that can count towards the FHSSS – this remains at $15,000 p.a. This means that it will take a member, at least four years of voluntary contributions, to reach the higher $50,000 limit.
How can we help?
At Moore, we are working with our clients who employ staff in preparation for these changes in their payroll processes. Navigating your way through the superannuation contribution rules can be complex with many different caps and thresholds, especially in the lead up to retirement.
Please speak to your Moore advisor team to discuss whether any of these changes and opportunities apply to you.
This article is issued as general commentary - please contact us about your specific circumstances.