Words by Russell Lees
Many thanks to the members who reached out to me with questions from my last article. In this article, I run through several changes to rules around superannuation, mainly changes that affect making contributions post 65 years of age.
Feel free to reach out to me at russell@kauriwealth.com.au or www.kauriwealth.com.au with any questions about your situation.
Australia’s superannuation system always seems to be changing, but this year the changes were more limited than usual.
The reforms that came into place were more tinkering than wholesale change. But, in several cases, they represent sensible simplifications that should make it easier for everyone to use – and understand – our complex super system.
Many of the changes were initially announced in the May 2021 Federal Budget but took quite a while to make their way through both houses of Parliament. Some only passed in the dying days prior to Parliament rising for the 2022 Federal Election.
If all the recent changes and reforms have left you wondering what it all means for your super and retirement plans, here’s a quick guide to the key legislative changes and when they commenced.
- Increase in Super Guarantee percentage
From 1 July 2022, the percentage rate for the Super Guarantee (SG) increases from 10% to 10.5%. Employers are required to contribute additional money to their employees’ super accounts in line with the higher SG percentage rate.
The SG has been 10% since 1 July 2021 and under the current schedule of legislated increases, the percentage rate will rise again to 11% on 1 July 2023. It will continue rising 0.5% each year until it reaches its final rate of 12% on 1 July 2025.
- Removal of the $450 monthly SG threshold
A major change commencing 1 July 2022 is the abolition of the $450 monthly minimum wage threshold to qualify for employer Super Guarantee contributions.
This scrapping of the monthly threshold amount means employers are now required to make super contributions for all their employees (including casual and part-time employees) regardless of how much they earn. The only exceptions are employees aged under 18 and working less than 30 hours per week.
- Reduction in the eligibility age for downsizer contributions
Following the passage of the Treasury Laws Amendment (Enhancing Superannuation Outcomes) Regulations 2022, the eligibility age for making downsizer contributions into super was reduced from 65 years to 60.
From 1 July 2022, more people in their sixties can make contributions (up to $300,000 per person or $600,000 per couple) into their super account using the downsizer measure, provided they meet the eligibility criteria.
- Increase in age limit for voluntary super contributions
From 1 July 2022, anyone aged 67 to 74 who wishes to make a non-concessional, voluntary super contribution is no longer required to meet the work test to be eligible to make the contribution. The other normal eligibility criteria, such as a Total Super Balance (TSB) of less than $1.7 million and sufficient unused annual non-concessional contributions cap still apply.
The only exception is for people wishing to make a personal contribution into their super account and then claim a tax deduction for the contribution. This type of personal concessional contribution still requires the contributor to meet the work test.
- Spouse contribution age limit increased
In line with the other increases in the contribution age limits, from 1 July 2022 it is possible to make a contribution into your spouse’s super account without you or your spouse needing to meet the requirements of the work test. The other normal eligibility criteria, such as a TSB of less than $1.7 million and sufficient unused annual non-concessional contributions cap, still apply.
- Increase in age limit for salary-sacrifice contributions
The age limit for making salary-sacrifice contributions into super without needing to meet the work test has also been increased from age 68 to 74. This means from 1 July 2022, eligible salary-sacrifice arrangements into super are available to anyone aged under 75 without the need to meet a work test. The other normal eligibility criteria, such as a TSB of less than $1.7 million and sufficient unused annual non-concessional contributions cap, still apply.
- Increase in age limit for bring-forward rule
Older super fund members who want to make a large non-concessional contribution into their super account can now do so from 1 July 2022, after the Treasury Laws Amendment (Enhancing Superannuation Outcomes) Regulations 2022 became law. The reform lifts the cut-off age for using the bring-forward rule to under 75 from under 67 previously.
This means people up to age 74 can use up to three years’ worth of their non-concessional (after-tax) contribution caps over a shorter period. Eligibility to use the bring-forward rule will still depend on the contributor’s TSB at 30 June of the previous year and the total of personal contributions over the past two financial years.
- Increase in First Home Super Saver Scheme (FHSSS) limit
From 1 July 2022, the maximum amount of eligible contributions that can be released through the First Home Super Scheme (FHSS) increases from $30,000 to $50,000. However, the annual limit for voluntary contributions eligible for the scheme remains at $15,000 per financial year.
- Temporary reduction in super pension minimum drawdowns
The government has extended the temporary reduction in the minimum drawdown rates by 50% for account-based pensions and similar products in the 2022–23 income year. The temporary reduction also applied to the 2019–20, 2020–21 and 2021-22 financial years.
- Changes to the Home Equity Access Scheme (HEAS)
Following passage of the Social Services and Other Legislation Amendment (Pension Loans Scheme Enhancements) Act 2022, older Australians who have applied to use the government’s HEAS can access lump sum advance payments from 1 July 2022. The maximum advance is capped at 50% of the maximum annual rate of their pension (including pension and energy supplements and rent assistance).
The legislation also introduced a no negative equity guarantee for HEAS participants to ensure participants with an outstanding loan balance on or after 1 July 2022 will not have to repay more than the equity they have in the property used to secure their loan.
If anyone has any questions in regard to the above, feel free to reach out to me at russell@kauriwealth.com.au
