Change to the Work Test if You’re Over 67
On February 22nd, royal assent allowed new superannuation changes into law from July 1st 2022. From this date, the work test is no longer required for those aged between 67 and 74 when making or receiving after tax non-concessional superannuation contributions or salary sacrificed contributions.
A work test will only apply for personal deductible contributions and will be solely administered by the ATO. Current annual limits are $27,500 of Pre-Tax Contributions (Salary Sacrifice and Employer Contributions) and $110,000 of Post Tax Non-Concessional Contributions.
Interpretation of the new laws are being finalised with the ability for those under 72 or possibly 75 to be able to bring forward contributions of up to $330,000 subject to total superannuation balances as of 1 July.
This will create an opportunity for clients wanting to take advantage of generous tax incentives in retirement. Currently, each taxpayer can access up to $1.7 million of a tax-free status in what is known as the pension phase – the capital base used to commence a retirement-based pension income stream.
In the past, restrictive annual contribution limits have been a barrier to entry. However, these new measures will allow more Australians to thrive in their retirement as more of their money can go into the best possible tax structure whilst retaining lump sum access to their funds in need.
Age Reduced to Access Downsizer Contribution
The other significant change to super as of 1 July 2022, is the age of those who can access downsizer contributions has reduced from 65 to 60.
This will allow people who have sold their home that they have owned for at least 10 years to contribute up to $300,000 each (i.e., 2 x $300,000 for couples) into the superannuation system in addition to the new normal contribution limits. As long as the taxpayer/s make the contribution within 90 days of settlement, the superannuation fund can receive a large one-off boost.
This strategy combined with the new contribution limits may help transform how you have been thinking about your retirement plan.
There is now a real emphasis on removing the barriers for funding your retirement and creating opportunities for you to retire with more. With new changes just around the corner at the turn of the financial year, speaking with a Viridian advisor about potential for new contributions, recontribution strategies and concessional catch-up payments could be truly beneficial.
Employer contributions to increase to 10.5% per annum for all employees.
The good news is that this is a boost to your Super. On the downside, depending on your contract, you may notice that there is a decrease in your paycheck if your remuneration package is inclusive of Super.
The $450 Super Guarantee threshold will be removed.
The threshold meant workers were only entitled to SG contributions if they were over the age of 18 and earned $450 or more from an employer (before tax) per calendar month.
Treasury’s 2020 Retirement Income Review Final Report notes that around 300,000 people, were affected by this exception from SG contributions. They were mainly young, lower income and part-time workers, and almost two-thirds of them were women.
From 1 July 2022, all eligible workers aged 18 years or older will be entitled to receive SG contributions regardless of how much they earn. Keep in mind that workers under 18 will still need work over 30 hours per week to be eligible for contributions.
Extension of reduction of pension payment.
The government has extended the provision to allow Pension phase members to reduce their required pension payment by 50%. A member can withdraw more than the minimum and if you have any questions about the appropriate drawdown, please speak with your adviser. It may allow retirees to allow their investment to grow if they have other means of covering their expenses.
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