Tag Archives: Superannuation

Super changes that could affect you from 1 July 2022

By Robert Wright /June 03,2022/

The government has announced a number of changes to the super system could create opportunities for Australians of all ages. Here’s a rundown of what you need to know.

• More people will be eligible for contributions from their employer, under the Superannuation Guarantee (SG), as the minimum income threshold of $450 per month will be removed.
• Work test requirements for those aged 67 to 75 will be softened and only apply to people who want to claim a tax deduction on voluntary super contributions they may be making.
• More people will be able to make up to three years’ worth of non-concessional super contributions in the same financial year, with the cut-off age increasing from 67 to 75.
• More people will be eligible to make tax-free downsizer contributions to their super from the proceeds of the sale of their home, with the eligibility age reducing from 65 to 60.
• First home buyers, who meet certain criteria, will be able to withdraw an additional $20,000 in voluntary contributions from their super, to put toward a deposit on their first home.

How you could benefit from the changes

Compulsory (SG) contributions from your employer

Under the government’s Superannuation Guarantee (or SG for short), you currently need to earn at least $450 per month to be eligible for compulsory super contributions from your employer. However, from 1 July 2022 that minimum income threshold will be removed. 

This means that even where an eligible employee earns less than $450 in a calendar month, there is now an obligation on the employer to make contributions.

The work test 

Currently, people aged 67 to 74 can only make voluntary contributions to their super if they’ve worked at least 40 hours over 30 consecutive days in the financial year, unless they meet an exemption.

From 1 July 2022, the work test will no longer apply to contributions you make under a salary sacrifice arrangement with your employer, or personal contributions that you don’t claim a tax deduction for.

The work test however will still need to be met if you wish to claim a tax deduction on 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.

Non-concessional super contributions

Currently, those under the age of 67 at the start of the financial year can make up to three years of non-concessional super contributions under bring-forward rules. 

From 1 July 2022, the cut-off age will increase to 75.

The bring-forward rules allow you to make up to three years of non-concessional contributions in a single year if you’re eligible. This means you could put in up to three times the annual cap of $110,000, meaning you could top up your super by $330,000 within the same financial year.

How much you can make as a non-concessional contribution will depend on your total super balance as at 30 June of the previous financial year.

Downsizer contributions

The age Australians can make tax-free contributions to their super from the proceeds of the sale of their home, which needs to be their main residence, will be reduced from 65 to 60. (Note, there is no upper age limit for downsizer contributions and no requirement to meet the work test.)

The maximum downsizer contribution amount of $300,000 per eligible person and other eligibility requirements remain unchanged.

For couples, both spouses can make the most of the downsizer contribution opportunity, which means up to $600,000 per couple can be contributed toward super.

The First Home Super Save Scheme (FHSSS)

The First Home Super Saver Scheme (FHSSS) aims to provide a tax-effective way for eligible first home buyers to save for part of a deposit on a home.

Under the scheme, you can withdraw voluntary contributions (plus associated earnings/less tax) from your super fund, with the current maximum withdrawal broadly $30,000 for each eligible individual.

From 1 July 2022, this withdrawal cap will increase to broadly $50,000 for each eligible individual.

Source: AMP

Roughly 500,000 Australians plan to retire in the next 5 years.

By Robert Wright /June 03,2022/

According to the ABS, some half a million people intend to retire within 5 years.

While many Australians will remain working until they can access their superannuation savings and/or the Age Pension, some 32% of people choose to retire beforehand due to health reasons, retrenchment, or a lack of suitable employment opportunities.

No one can predict the future. Unforeseen circumstances can strike at any time, so it’s best start your retirement plans early while you are young, healthy and earning an income.

A well-structured retirement plan can guide you towards your dream retirement while giving you a sense of security and confidence about the years ahead.

An effective retirement plan will outline how you can make the most of your money and investments today, so that you can afford the retirement lifestyle you imagine in the future.

As retirement planning specialists, we can show you how to make your retirement goals a reality.  Even if you feel you have left it a little too late, it’s never too late to get started.

For further information about how we can tailor an effective retirement plan for you, don’t hesitate to contact us today.

New opportunities to grow your Super from 1 July 2022

By Robert Wright /May 25,2022/

Both older and younger Australians, as well as low-income earners, are set to benefit from some upcoming super opportunities.

From 1 July 2022, there will be some changes made to super to make it easier for people to grow their retirement savings. These changes will create opportunities for both older and younger Australians, as well as low-income earners, by removing some of the barriers that currently exist in the super system.

Here’s what’s changing:

• The $450 Super Guarantee (SG) threshold will be removed, meaning that employers will start paying super for low-income earners.
• The SG contribution rate will rise to 10.5% p.a. for all employees.
• People aged 65-74 will no longer have to meet the work test to make voluntary contributions to super.
• The ‘bring-forward’ rule age limit will increase to 75, so more people can make lump sum contributions to super.
• The minimum age for downsizer contributions will reduce from 65 to 60, giving more flexibility to people who are selling their home.
• First home buyers can now save up to $50,000, and any deemed earnings, to use as a home deposit through the First Home Buyer Saver Scheme.

Here are some more details about how each of these changes will work, and how you can take advantage of these opportunities to boost your retirement savings.

Employers will start paying super for low-income earners

SG contributions are the mandated contributions that your employer puts into your super on your behalf. For a lot of people, these are the only super contributions that go into their account.

Until now, employers haven’t had to make these contributions if an employee earns less than $450 in a calendar month. Because of this, if you work casually, or you work part-time across multiple jobs, you may not have received any contributions at all from your employment.

From 1 July 2022, the $450 threshold will be removed. Employers will have to make SG contributions regardless of how much the employee earns (unless they are under 18 and working less than 30 hours per week).

Of all the upcoming super changes, this one has the potential to make the most difference, because it means low-income earners will finally have super contributions going into their account without having to make voluntary contributions themselves. These regular contributions can go a long way towards building up retirement savings.

For example, someone who currently works three jobs, earning $400 per month for each job, will now have $1,512 contributed to their super in 2022-23, which will then accumulate further earnings. Over a 40-year period, this could add up to over $84,000 or even substantially more, depending on how their super is invested. 

SG contribution rate will rise to 10.5% for all employees

The SG contribution rate is currently 10% p.a. of your wages or salary. This rate will increase to 10.5% from 1 July 2022, and it’s scheduled to increase progressively to 12% by July 2025.

Each of these incremental changes is great news for people who are paid SG contributions by their employers, because it means your super balance will grow faster without you having to make any extra contributions.

People aged 65-74 will no longer have to meet the work test to make voluntary contributions to super

People aged 65-74 currently have to satisfy the work test (or qualify for an exemption) to be able to make voluntary contributions to super. This means proving you worked for a minimum of 40 hours, during a period of 30 consecutive days, in the financial year for which you want to make a contribution.

Contribution acceptance:

From 1 July 2022, you won’t have to meet the work test for the super fund to accept any type of contributions you make to your super, or any contributions your employer makes to your super, while you are under age 75.

From age 75 the only type of contribution that can be accepted into your super account are downsizer contributions or compulsory employer superannuation contributions.

Personal deductible contributions:

From 1 July 2022, if you are aged 67 – 74 at the time you make a personal super contribution, you only have to meet the work test, or work test exemption, if you wish to claim a tax deduction for those contributions.

A work test is not required to claim a tax deduction for personal contributions made while you are under age 67.

This change gives older Australians more flexibility to be able to contribute to super and boost your retirement savings, regardless of your employment status, in the years leading up to your 75th birthday.

‘Bring-forward’ rule age limit will increase to 75

The ‘bring-forward’ rule allows you to use up to three years’ worth of your future non-concessional (after-tax) super contribution caps over a shorter period – either all at once or as several larger contributions – without having to pay extra tax.

The non-concessional contributions cap is currently $110,000 per year. So, if you use the bring-forward rule, you may be able to contribute up to $330,000 in a single year as long as you don’t exceed the total cap over the three-year period. This strategy is mostly used by people nearing retirement, who want to contribute as much as possible to super before they stop working, or people who receive an inheritance or other type of windfall.

Currently, you need to be under age 67 at any time in a financial year to use the bring-forward rule. From 1 July 2022, the age limit will increase to 75. This is great news for people who want to put as much money as possible into their super before they retire, without being penalised for it.

Eligibility for the bring-forward rule will depend on your total super balance at the most recent 30 June, and the amount of your personal contributions over the past two financial years.

Minimum age for downsizer contributions will reduce from 65 to 60

The downsizer contribution is a strategy aimed at helping older Australians put all or part of the proceeds of the sale of one qualifying home into super to boost your retirement savings. You can only make this type of contribution, and the maximum amount you can contribute is $300,000. However, by combining it with the bring-forward rule, you could potentially contribute $630,000 to super (or $1.26 million as a couple) in a single year.

Currently, you can only make a downsizer contribution if you’re 65 or older at the time of the contribution. From 1 July 2022, the minimum age reduces to age 60. This will provide more flexibility to people in their early sixties who are planning to sell their family home and want to move some or all of the proceeds into super.

Although the work test has never applied to downsizer contributions, other eligibility rules apply and it’s important to submit a downsizer contribution form to your fund at the time you make this type of contribution.

First home buyers can now save up to $50,000 using the First Home Super Saver Scheme

People saving up for their first home can use the First Home Super Scheme (FHSS) to grow their deposit amount. It takes advantage of the favourable tax treatment of super contributions and earnings to help you save a deposit faster than if you save outside of super.

You can currently use this strategy to release up to $30,000 in eligible voluntary super contributions, along with any deemed earnings, for the purchase of your first home.

From 1 July 2022, the maximum amount of eligible contributions that may be released will increase to $50,000. However, the annual limit of voluntary contributions eligible for the scheme remains at $15,000 per financial year. This means it would take at least four years of maximum contributions to have the maximum $50,000 available for release.

Given the substantial rise in property prices we’ve seen all around Australia over the past year, this change will help first home buyers save a larger deposit using this strategy – albeit over a longer time period.

Source: Colonial First State

Five ways you can start to bridge the super gender gap today

By Robert Wright /February 18,2022/

In terms of gender equality, we’ve come a long way over the past few decades. Australian homes and workplaces are very different places than they were in previous generations.

But there’s still a long way to go. When it comes to superannuation there isn’t a level playing field for Australian men and women.

Before we look at the gender super gap it’s worth looking at the gender pay gap. In May 2021, women working full-time earned $1,575.50 a week on average while men earned $1,837.00 – a gap of $261.50 or 14.2%

Not only do women tend to be paid less, they’re usually the main caregivers, with a staggering 93.5% of all primary carer leave taken by women. In 2018-19, among parents of children aged five and under, only 64.2% of women were in the labour force, compared with 94.6% of men. 

And women can suffer long-term financial effects from starting a family. Women with a child aged two or younger in 2001 experienced an average 77.5% reduction in earnings over the next 15 years, compared with those without children. Men with young children on the other hand faced no significant earnings penalty.

This all adds up to a significant shortfall in retirement savings. The average super balance for a 60-year-old Australian man is $198,482, compared with $165,986 for a woman.

The Federal Government’s Retirement Income Review sums it up: “On average, compared with men, women have lower wages, are more likely to work part-time, take more career breaks, and experience worse financial impacts from divorce. These factors contribute to the gender gap in superannuation balances at retirement.

Different strokes for different folks

Of course, we’re all different and everyone’s situation is Getting your retirement plans back on track unique. There are many households in which the woman earns more and the man takes on the bulk of the domestic responsibilities. And many Australians are happily single or childfree.

But the facts speak for themselves. On average, Australian women tend to earn less, spend more time out of the workforce raising a family and have less retirement savings as a result.

So whatever your personal circumstances – single or partnered, kids or no kids – you could be faced with a challenge when it comes to generating enough income to enjoy a comfortable retirement, particularly if you dipped into your savings to get you through COVID as part of the Federal Government’s early release of super scheme in 2020.

Getting your retirement plans back on track

But all is not lost… here are five ways women – and men – can start to rebuild their super balance.

1. Search for lost super. You may have a few old super accounts from previous jobs. Now’s the time to find them – and even look at bringing them together into one account if that’s right for you.
2. Personal contributions. Lockdown has been tough on everyone. And if you’re suffering the financial impact of continuing restrictions, super is probably the last thing on your mind. But if like many of us you’ve given in to the occasional bit of indulgence to help you through – with spending on home improvements, online gambling and food delivery soaring during the pandemic– then there might be ways to save a bit extra. If you’re able to curb your spending a little, even a small contribution to super could make all the difference.
3. Salary sacrifice. It might not sound too appealing but in the case of super, sacrificing can help you get ahead. Most Aussies will pay less tax on these super contributions than on their income, as well as enjoying the benefits of super’s tax-friendly environment on earnings and eventual withdrawals.
4. Spouse contributions. If your partner earns more, they could make a contribution to your super fund and claim a tax offset of up to $540, if eligible.
5. Low income super tax offset. If you earn $37,000 or less a year – like many women who work part time while looking after their children – and your employer makes super contributions on your behalf, the government may refund the tax paid on these contributions back into your super account, up to $500 per year.

Source: AMP