The 2021 Federal Budget has proposed some positive superannuation related changes which will simplify and add extra flexibility for retirement savings, as follows:
Removing the Work test for voluntary contributions
Previously the work test applied to contributions made by individuals aged 65 or older and this was recently amended to 67 or older.
The budget measure removes the work test for individuals aged 67 to 74 years and allows individuals to make non-concessional member contributions and salary sacrifice contributions (pre-tax contributions made by an employer), without having to work at least 40 hours over a period of 30 consecutive days.
Note that individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions.
Please note that contribution caps still apply.
Reducing the age limit for downsizer contributions
Currently eligible individuals aged 65 or older can make downsizer contributions where certain conditions are satisfied, and this age criteria is reduced to apply to eligible individuals age 60 or older.
Please see your accountant for further details on the downsizer contribution eligibility criteria.
Removing the $450 per month threshold for Super Guarantee
Currently employers do not need to pay SG for employees earning less than $450 per month and this threshold will be removed.
Relaxing the Residency rules for SMSFs
Residency rules currently have two aspects to consider; the central management and control test and the active member test.
The safe harbour for the central management and control test is extended from 2 to 5 years (for members who are temporarily overseas) and the active member test will no longer apply.
Exiting legacy retirement products
Currently legacy pension products including market-linked, life-expectancy and lifetime pensions of an SMSF are restricted in their ability to be converted into modern retirement pensions.
There will be a two year period in which individuals will be permitted full access to all of the product’s underlying capital and reserves to enable transition.
Please see your accountant for further details.
Increasing the maximum releasable amount under the First Home Super Saver scheme from $30,000 to $50,000
Please see your accountant for further details on this scheme.
Please note that all of these proposed changes are still to be legislated and it is expected that they will apply from 1 July 2022.