As with life, the only constant with our superannuation system is change.
It’s important to familiarise yourself with any legislative changes, and how you could best maximise new rules in optimising your balance now and in the future.
Some recent changes to super include:
- Increase in the concessional (before-tax) contribution cap: From 1 July 2021, the annual cap for concessional (before-tax) contributions into superannuation rose from $25,000 to $27,500. This increased cap allows people to contribute more to super on a pre-tax basis. Further, the unused concessional cap amounts from previous years may be able to be carried forward to future years if your super balance is less than $500,000.
- Higher non-concessional (after-tax) contributions cap: Non-concessional contributions are voluntary contributions made using after-tax dollars. The non-concessional contributions cap also increased from 1 July 2021 to $110,000 per year (previously $100,000). Non-concessional contributions may be an option to top up your super if you’ve reached your concessional contributions cap, been in receipt of an inheritance, or have cash available from the sale of a large asset.
- Bring-forward rule extended to age 65 and 66: The superannuation ‘bring-forward’ rule allows eligible people to contribute up to three years’ worth of non-concessional contributions in a single financial year (three years x $110,000 = $330,000). Previously, this option was only available to those under age 65. Australians aged 65 and 66 (that is, under 67 at the start of the tax year), will now be able to make up to three years of non-concessional super contributions under the existing bring-forward rules. This change has been backdated and covers contributions made on or after 1 July 2020.
- Transfer balance cap: The transfer balance cap limits the total amount of super that can be transferred into a retirement phase income stream, where there is no tax on investment earnings. From 1 July 2021, the transfer balance cap increased from $1.6 million to $1.7 million for members who commence a pension or tax-free retirement income account for the first time.
- Temporarily reducing superannuation minimum payment amounts: To assist retirees, the Government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50 per cent for the 2021–22 financial year. Superannuation and annuity providers calculate the minimum annual payment required as at 1 July each year, based on the account balance of the member or annuitant. The 50 per cent reduction will apply to this calculated minimum annual payment.
- New age threshold for downsizers: The eligible age for downsizer contributions will be lowered from age 65 to 60 under a proposal expected to take effect from 1 July 2022. This will allow retirees to contribute up to $300,000 to superannuation from the proceeds of the sale of their home. In the case of couples, it may be possible to contribute up to $300,000 each. 60 is the lower limit age – there is no upper limit.
As always, it’s worth speaking with a qualified professional about how these measures affect you now and in retirement.
This article was published in the 2021-22 Summer Issue of Financial Times.