Several key super changes which may impact your ability to contribute to your Super and Self Managed Super Funds (SMSF), take effect from 1 July 2022. These changes create opportunities for all Super members, young and old, to grow their retirement savings.
What are the changes?
Originally announced in the 2021 Federal Budget, the following changes apply from 1 July 2022:
- 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
- The Superannuation Guarantee (SG) rate will increase to 10.5% p.a. for all and the $450 minimum income threshold for SG contributions, will be removed
- Under the First Home Super 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
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.
This means that the work test will no longer apply to contributions you make under a salary sacrifice arrangement or for any personal contributions that you don’t claim a tax deduction for, such as non-concessional contributions.
Non-concessional Contribution
From 1 July 2022, the cut-off age to access the bring-forward rules will increase to 75. However, the total super balance thresholds referred to above, still apply.
This means that if you are 74 on 1 July 2022 and you have a total super balance of less than $1.48m, you may be able to have one last boost to your retirement savings by making a $330,000 non-concessional contribution to your Super or SMSF. The contribution simply must be made, no later than 28 days after the month in which you turn 75.
Downsizer Contributions
If you are selling your home and expect to receive the sale proceeds close to the end of this financial year, please contact our office 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 Super, 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)
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.
We are here to help?
Navigating your way through the superannuation contribution rules can be very complex, especially in the lead-up to a member’s retirement. If you have any questions, require assistance, or would like to discuss whether any of these opportunities apply to you, please feel free to contact me, or give our Wealth Management team a call on (07) 4154 0400 to arrange a time to discuss.
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