Opportunities have been created, particularly for older clients, as a result of the passing of 2021 Federal Budget super proposals. The legislated changes (which commence own 1 July 2022) include…
Removal of the work-test requirement
The work test will no longer need to be met by individuals aged between 67 and 75 when making:
salary sacrifice contributions, and
personal contributions.
Note:
The work test will still need to be met (or work test exemption applied) to claim a tax deduction for personal contributions.
Note:
Contributions will need to be received no later than 28 days after the month the person turns 75.
The removal of the work test applies to personal contributions including spouse contributions, contributions under the small business CGT cap and transfers from foreign super funds.
Validation of having met the work test requirement will no longer be part of the super contribution acceptance rules. Trustees of super funds will not be required to ensure the work test has been met in relation to personal deductible contributions (PDCs). From 1 July, the work test will instead become a requirement under Tax Law, should a person wish to claim a deduction in respect of a personal contribution that was made when they were aged 67 to 75.
Changes to bring forward NCC eligibility
Individuals aged less than 75 at the prior 1 July will be eligible to access the non-concessional contribution (‘NCC’) bring forward arrangement, subject to meeting all relevant eligibility criteria.
Note:
There is no tapering of the bring-forward for those approaching 75.
Contributions will need to be received no later than 28 days after the month the person turns 75. However, where a person turns 75 in June, this will not permit them to trigger the bring-forward arrangement in July the following financial year. Despite having a 28 day window in which to make personal contributions after the month in which they’ve turned 75, this doesn’t change the requirement that the individual must be 74 or under at some time during the financial year to be eligible to trigger the bring-forward rule.
Extension of downsized contributions to age 60
Downsizer contributions will be able to be made by individuals aged 60 or over. In 2021/22 and prior years, downsizer contributions can only be made by a person 65 or older at the time of the contribution.
Note:
The rules require that contributions are made within 90 days of settlement. Eligibility is based on the person’s age at the time of the contribution.
First Home Super Saver scheme - increased release amount
Currently, up to $30,000 of voluntary super contributions can be released (along with associated earnings) and used for a deposit on a first home. This amount will increase to $50,000, plus associated earnings.
The limit on contributions that can be made annually (within ordinary contribution caps) will remain to be $15,000.
Note:
While this change increases the total amount that can be invested for a home purchase in a concessionally taxed environment, the annual limit of $15,000 on contributions that can be made and later accessed under the scheme means that to use the scheme to its full extent:
investments will need to be made over a longer period of time, and
higher income earners who have more of their CC cap utilised by SG contributions will need to make voluntary contributions over a greater number of years.
Who might benefit from the changes?
✓ Older Australians with a large taxable component in super.
✓ Those in receipt of an inheritance or selling assets in retirement who would benefit from boosting super savings.
✓ Existing recipients of death benefit pensions who would prefer to consolidate their own account-based pension with the death benefit pension or hold an amount of the death benefit in accumulation.
✓ Australians aged 60 to 64 selling a property owned for 10+ years that is eligible for at least a partial main residence exemption – not previously eligible for a downsizer contribution.
✓ Those selling an eligible property and would maximise their, or their partner’s, social security benefits and entitlements by investing sale proceeds in an exempt accumulation interest (while under their Age Pension age).
✓ Members of a couple aged 67+ where one spouse has (or is expected to) fully utilised their TBC and has a remaining accumulation interest, or additional funds outside super they wish to contribute.
✓ Australians (of any age) saving for a first home deposit.
Clients should contact Westmount to see if any of the above changes will effect them.
Rick Maggi