Superannuation Enhancements Passed
In welcome news, the Federal Parliament passed the Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021. Effective from 1 July 2022, this legislation will implement the following superannuation changes:
1. Partially removing the work test for those aged 67 to 75
Make it stand out
The existing work test (broadly a minimum of 40 hours of gainful employment within a period of 30 days) or the work test exemption for recent retirees’ will no longer be required from 1 July 2022 for individuals aged 67 to 75 who make/receive salary sacrifice or non-concessional contributions (NCCs).
The work test or recent retiree exemption will still be required for individuals in that age range who wish to claim a tax deduction for their personal contributions. Under the new rules, the work test can be met in any period in the financial year of the contribution. This is different to the current rules, where the work test must be met prior to contributing.
If the client has made a contribution and has not met the work test, they will be ineligible to claim a tax deduction for the contribution. The contribution will be classified as NCC and will count towards the client’s NCCs cap. The existing upper age limit on making voluntary contributions (within 28 days of the end of the month where the member reached age 75) remains unchanged (with the exception of downsizer contribution).
Enabling regulations will be required to give effect to this measure.
2. Extending the non-concessional contributions bring-forward age limit
The cut-off age for accessing the NCCs bring-forward rule will be increased from 67 to 75 years.
This means that many individuals aged 67 to 74 years (inclusive) who were not previously able to bring forward NCCs cap amounts due to their age, may now do so from 1 July 2022. Existing restrictions on the full availability of bring forward contributions will continue to apply to individuals with Total Super Balance over $1.48 million.
3. Increasing the maximum First Home Super Saver Scheme withdrawal amount to $50,000
The FHSSS is a scheme that allows first home buyers to save part of their home purchase deposit in the concessionally taxed superannuation environment.
The maximum FHSSS withdrawal amount will be increased from 1 July 2022 from the current limit of $30,000 (plus notional earnings, less tax) to $50,000 (plus notional earnings, less tax).