The changes outlined below were proposed in March’s Federal Budget and come into effect from 1 July this year.
If you’d like to talk with someone about how these changes could affect you, please contact Allan Hall’s Superannuation Team.
Change
Before 1 July 2022
From 1 July 2022 onwards
You’ll no longer need to earn $450 or more in a calendar month to receive Employer Super (SG) contributions from your employer
A person has to earn at least $450 in a month to be eligible for Employer Super (SG) contributions.
The minimum earnings threshold of $450 per month will no longer apply. This means all employees, regardless of how much they earn, are entitled to receive Employer Super (SG) payments into their super accounts.
The withdrawal limit for
the First Home Super Saver Scheme (FHSSS) is increasing
The maximum you can save and withdraw using your super account under the FHSSS is $30,000.
The maximum you can save and withdraw is increasing from $30,000 to $50,000.
The age you can make Downsizer contributions is reducing
People aged 65 and over can contribute up to $300,000 to their super following the sale of their home. Couples could be eligible to contribute up to $300,000 each.
You will be able to make downsizer contributions from age 60 instead of age 65.
Changes to the work test for people between age 67 and 74
People aged 67 to 74 can only make extra super contributions (ie not SG contributions) if they meet the Work Test rules.
The work test
To meet the work test you must be employed for at least 40 hours over 30 days. (The 30 days must all be in the same financial year the contributions are made).
You won’t need to meet the Work Test when making extra contributions.
Instead, you will only need to meet the Work Test (or
work-test exemption) if you claim a tax deduction on personal contributions.
The age you can use the Bring-forward contributions rule is increasing
The Bring-forward contributions rule allows you to contribute up to three years of after-tax contributions ($330,000) in any one year if:
• you’re aged 67 or younger, and
• have a total super balance less than $1.48 million.
You will be able to use the Bring-forward contributions rule up to age 74 instead of up to age 67.
The minimum pension drawdown amount won’t be changing.
In 2019, the government temporally reduced the minimum pension drawdown amounts by 50%. This was in response to the economic effect of COVID.
The minimum pension drawdown is the minimum amount you must withdraw from your pension account each year. This amount depends on your age and is a % of your total balance.
The government had planned to return the minimum pension drawdown amounts back to pre-COVID levels from 1 July 2022. It has now extended the reduced minimum pension drawdown level for another year. This means the drawdown amounts will stay the same for the 2022 financial year.
The information in this brochure is of a general nature only and does not take into account your personal objectives, financial situation or specific needs. We recommend that you consider your own financial position, objectives and requirements and seek advice from an authorised financial adviser before making any financial decisions.
Allan Hall Business Advisers Pty Ltd is a Corporate Authorised Representative of Allan Hall SMSF Advisory Pty Ltd ABN 71 608 966 276 AFSL 485203. Allan Hall Financial Planning Pty Ltd is an Authorised Representative of Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323.
Most new employees are eligible to choose the super fund into which employers pay their super guarantee contributions.
Currently, when a new employee doesn’t choose their own super fund, the employer must pay super contributions into their default fund.
From 1 November, if any new employees start, the employer may have an extra step to comply with the choice of fund rules.
If a new employee doesn’t choose a super fund, the employer may need to request their ‘stapled super fund’ details from the ATO.
A stapled super fund is an existing super account that is linked, or ‘stapled’, to an individual employee so that it follows them as they change jobs.
The change aims to reduce account fees by stopping new super accounts from being opened each time they start a new job.
From 1 November, employers will be able to request stapled super fund details for new employees using Online services for business.
What employers can do now
To make sure you’re ready when the time comes, check and update the access levels of your authorised representatives using Online services on behalf of your business. This will also protect the personal information of your employees.
Please contact Allan Hall’s Accountants in Brookvale on 02 9981 2300 if you have any queries about stapled super funds prior to 1 November.
Concessional contributions are before-tax contributions that include both employer contributions (i.e. superannuation guarantee amounts and salary sacrificed amounts) and personal contributions for which a person may be eligible to claim a tax deduction in their personal income tax return.
Concessional contributions are included in the assessable income of the super fund and taxed at 15%.
The concessional contribution limit is $27,500 for 2021/22.
Even if a person receives the majority of their income from employment, they are able to make personal tax-deductible contributions instead of having to enter into a salary sacrifice arrangement to top up their super.
These personal contributions can be made in addition to the 10% an employer contributes on their behalf and they can claim a personal tax deduction for them. The $27,500 cap on concessional contributions applies to the combined amount of the 10% from the employer and any additional amount contributed for which a tax deduction is claimed.
For those intending to make a personal contribution and claim a tax deduction, it is important to notify us so that we can correctly account for it in the super fund.
Please refer below for age limitations and eligibility rules generally regarding making super contributions.
Catch Up Concessional Contributions
Individuals with a total superannuation balance of less than $500,000 in a particular year are able to make ‘catch up’ contributions in 2021/22 if a person did not use their entire contribution cap of $25,000 in 2018/19, 2019/20 or 2020/21. The unused amount may be carried forward for up to five financial years.
For example, Jenny’s employer contributions are $10,000 in each of 2018-19, 2019-20 and 2020-21. Her total superannuation balance at 30 June 2021 was $350,000. This leaves an unused amount of her concessional contribution cap of $15,000 for each year, totalling $45,000 which Jenny can use to increase her concessional contribution cap if needed.
Jenny will therefore have a total concessional cap of $72,500 for 2021-22 comprising the annual concessional limit of $27,500 plus $45,000 of unused concessional contributions from the three prior financial years. She has two years left to use the initial unused contributions from 2018/19.
Non-Concessional Contributions
Non-concessional contributions are after-tax contributions made to super from a personal source. Non-concessional contributions are not included in the super fund’s assessable income and are therefore not taxed on entry into the fund.
If a person has a total superannuation balance in excess of $1.7m as at 30 June 2021, they are not able to make further non-concessional contributions to super in 2021/22.
If a person has a total superannuation balance below $1.7m as at 30 June 2021, their non-concessional contribution limit is $110,000 for 2021/22.
A person aged 66 or under on 1 July 2021 may have an ability to ‘bring forward’ the non-concessional contributions limit for the following two years in accordance with the following table.
Total Super Balance at 30 June 2021
Age < 67 on 1 July 2021 **
Age 67-74
Less than $1.48m
$330,000
$110,000
Greater than $1.48m & less than $1.59m
$220,000
$110,000
Greater than $1.59m & less than $1.7m
$110,000
$110,000
Greater than $1.7m
$0
$0
** Please note that is a contribution is made after turning age 67 during 2021/22 then the bring forward rules can be utilised but the work test must first be satisfied.
Work Test
For those aged 67 to 74 years, a work test applies in order to be eligible to contribute to super during the 2021/22 financial year.
To satisfy the work test, the person must have worked at least 40 hours in a consecutive 30-day period in the financial year before the fund is eligible to accept the contribution.
For those aged 75 or over, the super fund is only able to accept mandated employer contributions (i.e. superannuation guarantee amounts) made on their behalf.
In the May 2021 Federal Budget, the Government announced its intention to abolish the work test with effect from 1 July 2022 and allow persons aged less than 75 to utilise the above noted bring-forward rules from 1 July 2022 onwards however these budget proposals are not yet law.
Other Contributions
Individuals aged 65 or older may be able to make ‘Downsizer Contributions” of up to $300,000 per person subject to satisfying specific criteria upon selling your primary residence. The work test is not required to be met for this type of contribution.
Individuals selling a business or business assets may be able to make contributions using the “CGT Cap” subject to satisfying specific rules of the CGT Small Business concessions.
Contact our Allan Hall Self-Managed Superannuation team if you would like some help on 02 9981 2300.
The information in this brochure is of a general nature only and does not take into account your personal objectives, financial situation or specific needs. We recommend that you consider your own financial position, objectives and requirements and seek advice from an authorised financial adviser before making any financial decisions.
Allan Hall Business Advisers Pty Ltd is a Corporate Authorised Representative of Allan Hall SMSF Advisory Pty Ltd ABN 71 608 966 276 AFSL 485203. Allan Hall Financial Planning Pty Ltd is an Authorised Representative of Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323.
Employers please note, if you intend to claim a tax deduction in 2020/21 for your employees’ June 2021 quarter super contributions, please ensure you make the payment as soon as possible and by no later than 16 June 2021 so as to allow at least 2 weeks for the contributions to be processed through the superannuation clearing house and allocated to your employee’s super accounts.
Otherwise please ensure the contributions are made by mid-July to ensure you meet the due date deadline of 28 July 2021.
Please note: Employers should turn their attention to managing the superannuation guarantee (SG) increase which comes into effect 1 July. Read more »
Personal Contributions
If you are seeking to maximise your personal contributions in 2020/21, please carefully review the limits and information provided below. As there will be an increase in the contribution limits taking effect from 1 July 2021, these are also noted below for planning purposes.
Financial Year
Concessional Cap
Non-concessional Cap1
(Employer / Salary Sacrifice Personal Deductible)
(Personal After Tax & Subject to Total Super Balance <$1.6m)
2020/21
$25,000
$100,000
2021/22
$27,500
$110,000
Your contributions must be received in your Fund on or before30 June 2021 — the reasons are twofold to ensure that:
you are eligible to claim a deduction in 2020/21 for any personal concessional contributions made;
the contribution is counted against your limit for the correct year.
We suggest you make your contributions as soon as possible and by no later than 16 June 2021 so as to allow at least 2 weeks for the contributions to be processed and allocated to your account, particularly as super fund administrators are extremely busy at this time of year.
Be sure to check the amount of actual contributions already received / due to be received in your super fund before making any top up contributions.
If making tax deductible personal contributions, please ensure you submit a Notice of Intention to Claim a Deduction for Super Contributions form to your fund as soon as possible and check to ensure they issue you with an Acknowledgement of Receipt notice. You cannot claim a tax deduction without this receipt from your fund.
(1) Regarding the non-concessional cap, you may be eligible to ‘bring forward’ up to 3 years of contributions in 2020/21 if you were under age 65 on 1 July 2020 and meet certain criteria:
Total Super Balance as at 30 June 2020
Age <65 on 1 July 2020
Age 67-74
Maximum contribution allowable
Your total super balance is the combined total of all balances in super funds of which you are a member
No work test required for a person aged <67 at time of making the contribution
Work test is required
Less than $1.4m
$300,000
$100,000
Greater than $1.4m but less than $1.5m
$200,000
$100,000
Greater than $1.5m but less than $1.6m
$100,000
$100,000
Greater than $1.6m
$0
$0
This leaves us with an odd situation for those age 65-67 to be mindful of during 2020-21. For example Susan is retired, recently turned 65 and has a super balance of $650,000. She has inherited some money and would like to contribute $250,000 to her super fund before 30 June 2021. She is able to contribute the whole amount using the bring forward limit of $300,000 because she was age 64 at the start of the 2020/21 financial year.
Susan’s sister Jane, who is age 66, still working part-time and has a super balance of $800,000 would also like to contribute $250,000 to her super fund before 30 June 2021. Jane is only able to contribute $100,000 as she was not age 64 at the start of the 2020/21 financial year. Jane will be able to contribute a further $110,000 in 2021/22 and the balance of $40,000 in the following year.
Please note for planning purposes that the bring forward thresholds will change with effect for the 2021/22 financial year. These changes are noted in the following table below. Further, with the recent budget announcement, yet to be legislated, further changes will take effect for the 2022/23 financial year whereby the work test will be abolished and any person under the age of 75 will be able to make use of the bring forward thresholds pursuant to the table below.
Total Super Balance as at 30 June 2021
Age <65 on 1 July 2021
Age 67-74
Maximum contribution allowable
Your total super balance is the combined total of all balances in super funds of which you are a member
No work test required for a person aged <67 at time of making the contribution
Work test is required
Less than $1.48m
$330,000
$110,000
Greater than $1.48m but less than $1.59m
$220,000
$110,000
Greater than $1.59m but less than $1.7m
$110,000
$110,000
Greater than $1.7m
$0
$0
For anyone under age 65 wanting to optimise their super contributions, they may choose to contribute only $100,000 in 2020/21 to enable them to contribute $330,000 in 2021/22, provided all eligibility criteria is met.
Work Test
If you are aged 67 to 74 years, you must satisfy a work test in order to be eligible to contribute to super. To satisfy the work test, you must have worked at least 40 hours in a consecutive 30-day period in the 2020/21 financial year before the super fund is eligible to accept your contribution.
If you are aged 75 or over, your super fund is only able to accept mandated employer contributions (i.e. superannuation guarantee amounts) on your behalf.
As noted above, in the May 2021 Federal Budget, it was proposed that the work test shall be abolished from 1 July 2022 for those aged 67 to 74. This has yet to be legislated.
Government Co-contributions
If you are a low or middle-income earner and make a non-concessional contribution of at least $1,000 to your super fund, the Government may also make a co-contribution up to a maximum of $500. If your total income is equal to or less than the lower threshold of $39,387 for 2020/21 and you make a non-concessional contribution of $1,000, you will receive the maximum co-contribution of $500. You will not receive any co-contribution if your income is equal to or greater than the higher threshold of $54,837 for 2020/21. If your total income is between those thresholds, the payment will be pro-rated. The ATO calculates your total income by adding:
assessable income
reportable fringe benefits total
total reportable super contributions reduced (but not below zero) by any excess concessional contributions
minus:
assessable first home super saver released amount
allowable business deductions.
‘Catch Up’ Contributions
A reminder that these rules commenced on 1 July 2018, therefore we are into the third year of ‘catch up’ contributions whereby a person with a super balance of less than $500,000 as at 30 June 2020 is able to make a personal concessional contribution in 2020/21 equal to the unused amount of the $25,000 limit from 2018/19 and 2019/20.
For example, John had employer contributions of $15,000 for each of 2018/19 and 2019/20. His total superannuation balance at 30 June 2020 was $380,000. If John has higher than normal taxable income in 2020/21, due to say, a capital gain then, in addition to his 2020/21 contributions he can contribute an extra $20,000 as a personal concessional contribution before 30 June 2021 to reduce his taxable income. The extra $20,000 comprises $10,000 in unused contributions from 2018/19 and from 2019/20.
Minimum Pension Withdrawals
If you are in pension phase, please check to ensure you have withdrawn your minimum pension for this financial year before 30 June 2021. Where these requirements have not been met your fund will be subject to 15% tax on its pension asset investment earnings, rather than being tax-free.
Please note, in March 2020 the Government halved the minimum annual payment required for a number of superannuation income streams, including account based pensions for the 2019/20 and 2020/21 financial years. Then on 29 May 2021, the Government extended the 50% reduction on pension minimum withdrawals for the 2021/22 financial year as well.
For our SMSF clients, please contact us if you are not sure of your minimum pension requirement for 2020/21.
Disclaimer: This article contains general advice only and has been prepared without taking into account particular objectives, financial circumstances and needs. The information provided is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should assess its relevance to your individual circumstances. The information provided in this newsletter is objectively ascertainable and therefore does not constitute financial product advice. If you require personal advice, please contact us to arrange an appointment with one of our licensed SMSF advisors.
Staff superannuation guarantee contributions for the December 2019 quarter are due before the 28th of January 2020.
We would like to remind all employers that Superannuation Guarantee (SG) Contributions for December 2019 are now DUE and must be received before the 28th of January.
If you are an employer or are responsible for managing employee superannuation contributions, we wish to remind you to pay staff superannuation guarantee contributions for the quarter ended 31st December 2019 BEFORE 28th January 2020 or you can be liable for penalties.
When arranging payment for this quarter, please ensure that you allocate enough time for processing. Payment must be received and banked by your employee’s super fund BEFORE 28th January 2020. Allowing 5 working days BEFORE the due date to remit your contributions is a good general rule of thumb.
What happens if the payment deadline is not met?
If payment is not made by the deadline, or to the correct fund, you may have to lodge a Superannuation Guarantee Charge (SGC) statement and pay the SGC. In some cases, Directors of companies can become personally liable if superannuation guarantee contributions are not paid by the due date.
Should you require assistance or advice in relation to the above please contact us on +61 2 9981 2300 or email [email protected] and your usual Allan Hall advisor will be able to assist.
How can we help?
If you have any questions or would like advice to ensure you and your funds are well prepared for the next quarterly due dates and beyond, please contact our team of Super advisors on +61 2 9981 2300 or use the below button.
CONTACT US
What happens if the payment deadline is not met?
If payment is not made by the deadline, or to the correct fund, you may have to lodge a