Several superannuation ideas outlined in this year’s Federal Budget have been submitted to Parliament as part of Treasury Laws Amendment Bill 2021.
These policies are intended to increase flexibility for Australians preparing for retirement. Will also help to extend the superannuation guarantee to people.
Following measures have been implemented:
- Cancellation of the work test for people aged 67 to 74
Citizens between the age of 67 and 74 will be permitted to make or receive non-concessional contributions without having to meet the work tests. It provides retirees under 75 greater flexibility to top up their superannuation. It will also enable advisers to execute methods like re-contribution plans.
It should be noted that the elimination of the work test will not allow individuals reaching the age of 75 to use the bring-forward rule for years in which they have no cap space.
Individuals aged 67 to 74 years old who want to make personal deductible contributions must still meet the existing job test.
- Lowering eligibility age for downsizer contributions to 60 years
The downsizer contribution eligibility age will be reduced to 60 years. All other eligibility conditions that apply to downsizer donations will remain in effect. The downsizer contribution regulations allow individuals to make a one-time after-tax contribution to superannuation of up to $300,000 from the profits of the sale of a property that they have owned for at least ten years.
By lowering the qualifying age for downsizer contributions to 60, an eligible couple in their early sixties might sell their property and contribute up to $1,260,000 to superannuation in a year by each making a $300,000 down-sizer contribution and a $330,000 NCC.
- Giving SMSFs the option of calculating exempt current pension income.
SMSF trustees will have the option of calculating ECPI in cases when the fund is fully in the retirement phase for part of the income year but not the entire income year.
The ATO currently believes that fund’s assets will be separated during this period, which means that the fund may need to utilize both the segregated and proportionate methods to calculate ECPI for the one year.
Trustees will be able to utilize the proportionate method for the entire income year based on a single actuary’s certificate, rather than being compelled to use multiple techniques to compute ECPI for different periods in the same income year.
- Eliminating the minimum SG threshold of $450 per month
Employers will be forced to make quarterly SG contributions on behalf of low-income employees earning less than $450 per month in the proposed rules. It was originally intended to reduce the administrative burden on employers. However, technological advances and the digitization of payroll systems undermine the rationale for a low threshold.
This move will help an estimated 3% of employees, who are primarily young, low-income, and part-time workers. These improvements will allow these workers to begin saving for superannuation earlier and will help to close the gender gap in superannuation savings.
- Escalating releasable amount of first home super saver plan to $50,000.
Individuals can now make voluntary concessional contributions and non-concessional contributions into superannuation and have them released to help pay for their first property. Under the FHSSS, the maximum releasable amount of qualifying voluntary CCs and NCCs will be enhanced from $30,000 to $50,000. The maximum amount of voluntary contributions that can be distributed under the new guidelines remains at $15,000 per fiscal year and $50,000 in total.
As a result, in order to take full advantage of the system under this measure, an individual would need to contribute over a four-year period.