New superannuation changes present contribution planning opportunities

Superannuation

1 March 2022

The measures that were originally announced in the 2021 Federal Budget, including changes to the work test and downsizer contributions, will have a significant impact on members of self-managed superannuation funds (SMSFs).

The changes have now passed through both Houses of Parliament and, upon receiving Royal Assent, the following key changes will come into effect from 1 July 2022.

Repealing the work test for superannuation contributions

Individuals aged 67-74 must currently meet the work test[1] before their SMSF superannuation fund can accept a personal superannuation contribution from them. The new legislation repeals the work test for those individuals under the age of 75 for non-concessional contributions and salary sacrificed contributions.

Only those individuals wishing to claim a personal tax deduction for their contribution will still be required to meet the work test. The non-concessional contribution “bring forward” rule has also been extended.

Downsizer Contributions

Whilst all other criteria still apply, the eligibility age for making a downsizer contribution by selling the principal place of residence has been reduced from 65 to 60.

Other changes coming into effect 1 July 2022 include:

  • Removing the monthly minimum threshold of $450 for salary or wages to count towards the Superannuation Guarantee.

  • Increasing the amount eligible for release for the First Home Super Saver Scheme from $30,000 to $50,000.

  • Segregated current pension assets that will allow Trustees more flexibility (under certain circumstances) to choose their preferred method for calculating Exempt Current Pension Income (ECPI) where they have had assets of the fund supporting pensions for part, but not all of the income year.

This new legislation presents significant opportunities for SMSF members, retirees and individuals approaching retirement age. If you believe you may be impacted by these changes, we recommend speaking to your adviser or you can request a call back from our team.

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[1] Having worked 40 hours in any 30-day period prior to making a contribution in a financial year.

Author: Naween Fernando

Naween joined the firm in 2002 as a Graduate and over that time has progressed to Associate Partner and now heads up the SMSF Team in Melbourne. He has a wealth of experience having also worked in the SMSF Audit Team for a number of years. He prides himself on delivering exceptional client service, identifying value-add opportunities and works closely with the Business Advisory and Wealth Management teams where service delivery extends across multiple service lines.