2021/22 Federal Budget - Superannuation related changes
The government has announced a raft of superannuation changes, including the abolishment of the $450 threshold and a super savings booster for retirees.
Abolishment of the $450 threshold
Treasurer Josh Frydenberg has scrapped the $450 a month threshold beyond which employers are obliged to pay super, helping to boost the retirement income of thousands of part-time workers.
The measure will have effect from the start of the first financial year after Royal Assent of the enabling legislation, which the government expects to have occurred prior to 1 July 2022.
The changes have been praised by women’s groups as the threshold causes almost twice as many women as men to miss out on super contributions when working in part-time roles.
Super savings booster for retirees
The eligibility criteria for the government’s existing downsizer scheme (introduced in the 2017 budget) is being expanded to include Australians aged 60 years and over.
The scheme, which allows participants to make a one-off, $300,000 contribution to their super, was previously only available to Australians aged 65 years or older.
"We will allow those aged over 60 to contribute up to $300,000 into their superannuation if they downsize their home, freeing up more housing stock for younger families", Mr Frydenberg said.
Removing the work test for voluntary contributions
The Government has announced that it will allow individuals aged 67 to 74 years (inclusive) to make or receive non-concessional contributions (including under the bring-forward rule) and salary sacrifice contributions without meeting the work test, subject to existing contribution caps.
Individuals aged 67 to 74 years (inclusive) will still have to meet the work test to make personal deductible contributions.
Currently, individuals aged 67 to 74 years (inclusive) can only make voluntary contributions (both concessional and non-concessional) to their superannuation fund, or receive contributions from their spouse, if they satisfy the work test (subject to a limited work test exemption). Generally, to satisfy the work test, an individual must be working for at least 40 hours over a period of not more than 30 consecutive days in the income year the relevant contribution is made.
Removing the requirement to meet the work test when making non-concessional or salary sacrifice contributions will simplify the rules governing superannuation contributions and will increase flexibility for older Australians to save for their retirement through superannuation.
Improving the Pension Loans Scheme
The Treasurer confirmed the government is increasing the flexibility and attractiveness of the Pension Loans Scheme (PLS) for senior Australians.
From 1 July 2022, the government will introduce a No Negative Equity Guarantee for PLS loans and allow people access to a capped advance payment in the form of a lump sum.
The PLS is a voluntary, reverse mortgage type loan available to assist older Australians who wish to boost their retirement income by unlocking equity in their real estate assets.
Increasing the First Home Super Saver
The Government has announced that it will make the following changes to the FHSS scheme.
Increasing the maximum releasable amount to $50,000
The Government will increase the maximum releasable amount of voluntary concessional and nonconcessional contributions under the FHSS scheme from $30,000 to $50,000, to assist first home buyers in raising a deposit more quickly.
Voluntary contributions made from 1 July 2017 up to the existing limit of $15,000 per year will count towards the total amount able to be released.
This change will apply from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects will have occurred by 1 July 2022.
Changes to improve the operation of the FHSS scheme
The Government will make four technical changes to the legislation underpinning the FHSS scheme to improve its operation as well as the experience of first home buyers using the scheme.
These four changes will apply retrospectively from 1 July 2018, and will assist FHSS scheme applicants who make errors on their FHSS scheme release applications by:
- increasing the discretion of the Commissioner of Taxation to amend and revoke FHSS scheme applications;
- allowing individuals to withdraw or amend their applications before receiving a FHSS scheme amount, and allow those who withdraw to re-apply for FHSS scheme releases in the future;
- allowing the Commissioner of Taxation to return any released FHSS scheme money to superannuation funds, provided that the money has not yet been released to the individual; and
- clarifying that the money returned by the Commissioner of Taxation to superannuation funds is treated as a fund’s non-assessable non-exempt income and does not count towards the individual’s contribution caps.
The Money Edge | Bundaberg