Opportunities to increase your Super

Recently there were some superannuation changes that received Royal Assent, meaning that they are now law and all will commence on 1 July 2022. 

These include:

  1. The $450 per month income threshold for making employer contributions is being abolished – a significant development for employers and casual/part time workers.  Find some further information here.
  2. The ‘works test’ is being abolished for non-concessional contributions for individuals aged 67 to 75. Also, individuals aged 67-74 will be able to bring forward three years worth of contributions.  It’s worth noting that the works test remains in place for concessional contributions.
  3. The eligible age for making a ‘downsizer’ contribution is decreasing from 65 to 60.
  4. The maximum amount of voluntary contributions under the First Home Super Saver Scheme increases from $30,000 to $50,000.
  5. Changes to how trustees calculate Exempt Current Pension Income when there are members in both accumulation and pension phase for parts of the year.

These changes are generally good news for Super Fund members and could lead to further planning opportunities to contribute into Super. In this article we give examples of how changes 2 and 3 can open up opportunities.

Bring forward contributions for 67 to 74 year olds and no work test – opportunity to make after tax contributions

Facts:

  • David has a balance of $2,000,000 and Jenny $1,000,000 in their Self-Managed Super Fund at 30 June 2021.  Both members are over 67 years old at 1 July 2021 (and under age 74). 
  • They have some money outside of super available to contribute into super in order to boost their retirement savings.

Under current rules:

  • David can no longer contribute and hasn’t for a few years because his total super balance is over $1.7 Million.  Jenny has been unable to contribute for the last few years because she has retired and cannot meet the works test (gainfully employed for 40 hours in a 30 day period).

Under new rules from 1 July 2022:

  • Jenny will be able to contribute $330,000 of non-concessional contributions (the normal $110,000 limit x 3) without needing to meet a work test. 
  • Her balance needs to be below $1.48 Million at 30 June 2022 in order to put in the full $330,000 but we presume it was given it was $1 Million at 30 June 2021.
  • David is still unable to make contributions as his total super balance is over $1.7 million.

Downsizer Contribution age decreasing to 60. 

Facts:

  • John and Jill are 61 years old and are strongly considering selling their home which they have held for 20 years in order to downsize.Both have total super balances over $1.7 Million so are unable to make any further after-tax contributions under current rules. 

Under the current downsizer scheme requirements, they would only be able to contribute up to $600,000 in total ($300,000 each) of the proceeds into super in 4 years time  (when they are 65 years old).

Because of this, John and Jill may potentially just wait (frustratingly) another 4 years before selling to take advantage of these rules, having to ride market risks and potentially compromise their desired lifestyle.

Because the age eligibility is decreasing to 60 at 1 July 2022, John and Jill are able to sell their home and provided settlement is after 1 July 2022, they can contribute up to $600,000 out of the proceeds into their super fund, provided they do so within 90 days of settlement.

A form needs to be given to the receiving super fund notifying them that the contributions have been done under the downsizer scheme.

A word of caution that you need to ensure all other conditions for accessing the downsizer scheme are met before going ahead with any contribution. Further details of this are here. Please contact us if you have any enquiries.

About the Author
Nick Petaroudas
Nick joined Accru Melbourne in 2011 and has over 15 years’ experience working in the public practice servicing clients in business services. He is our Superannuation Specialist and prides himself on being a Technical Superannuation Expert.
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