Last week the Government proposed the ‘Enhancing Superannuation Outcomes and Helping Australian Businesses Invest’ bill. This bill implements the various changes to superannuation announced earlier in this year’s federal budget.
The changes focus on providing greater flexibility to those approaching retirement and offering more significant support to women and younger members of society. These regulations have passed through parliament and will come into effect from 1 July 2022.
What are some of the key changes?
Removing the monthly minimum threshold ($450) for salary or wages to count towards the superannuation guarantee
Thanks to the digitalisation of payroll systems and advancements in technology, the Government has deemed it possible to provide superannuation guarantee payments to those earning less than $450 per month. Removing this threshold benefits younger, lower-income, and part-time workers.
Amendment to the first home superannuation saver scheme maximum releasable amount
The maximum releasable amount under the First Home Super Saver Scheme (FHSSS) will be increased from $30,000 to $50,000. The amendment provides further support to first home buyers trying to save for purchasing or constructing their first home.
The FHSSS was introduced in 2017 to help first home buyers into the property market through allowing them to use voluntary superannuation contributions to form part of their home deposit. The primary benefit of using the FHSSS is the concessional tax treatment that applies to the voluntary contributions.
The maximum amount that is eligible to be released from the superannuation environment is $50,000, in addition to an amount of associated earnings. However, you can only apply to have a maximum of $15,000 of your voluntary contributions from any one financial year included in the $50,000 total. Contributions that exceed those limits are not eligible to be released.
Lower eligibility age for downsizer contributions
The eligibility to make home downsizer contributions is lowered from age 65 to age 60.
Downsizer contributions allow individuals who may otherwise be prevented from making superannuation contributions the ability to sell their primary residence and make a superannuation contribution from the proceeds of the sale.
This provides greater flexibility for older Australians to contribute funds to the tax-effective superannuation environment. It may also encourage individuals to downsize to a home that is more appropriate for their needs, thereby freeing up the stock of larger homes for younger families.
Repealing the work test for superannuation contributions
Individuals aged between 67 and 75 will now be allowed to make non-concessional and salary sacrifice contributions without the need to meet the work test or work test exemption. The work test will still be required for personal deductible concessional contributions.
The work test requires individuals aged over 67 to have been gainfully employed for at least 40 hours in 30 consecutive days in the financial year to make tax-deductible superannuation contributions.
Capital Partners is monitoring the outcome of the proposed bill and will ensure clients are properly updated should opportunities arise.