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Superannuation update from a Gold Coast financial advisor
A number of superannuation (super) reforms that were announced last year came into effect in Australia on 1 July 2022.
Many of the changes are good news for anyone who has retirement on their mind — there are opportunities to increase your savings and build a bigger nest egg for the future.
Here’s what is different from 1 July 2022:
Your employer will pay a higher rate of super guarantee
If you’re in paid work, your employer must pay 10.5% of your ordinary time earnings into your superfund, an increase from the previous amount of 10%. This is set to increase further as well; the amount will continue to increase until it reaches 12% in 2025.
This change should take place automatically but check your pay slip to make sure your employer super payments have increased and mention it to your employer if you don’t see a change.
$450 monthly income threshold scrapped
Previously, if you earned less than $450 per month, your employer was not required to pay you super. This threshold has now been scrapped.
If either you or your partner only works on a casual or sporadic basis, this will make a difference to your retirement savings.
Keep in mind that workers who are under 18 are still required to work more than 30 hours in a week to be entitled to super in most circumstances.
First home buyer opportunities
There’s no time like the present to buy your first home… and it’s also never too late.
The maximum amount of First Home Super Saver (FHSS) savings that can be released via the FHSS scheme will increase from $30,000 to $50,000 from 1 July 2022. Couples can access their own FHSS savings to purchase the same property, to a combined maximum of $100,000.
The annual FHSS contribution cap remains unchanged at $15,000.
Downsizer super contributions
At the other end of the homebuyer journey, super changes are encouraging people over the age of 60 who own family homes to sell up.
If the time is right to downsize, you can contribute up to $300,000 from the sale of your family home to your super fund. For couples, the combined maximum is $600,000.
You can only sell your main residence under this scheme and there are the following caveats:
- You have reached the eligible age at the time you make a downsizer contribution. From 1 July 2022, this is 60 years old or older. Prior to this it was 65 years old or older. (There is no maximum age limit.)
- It must be in Australia
- You must put the contribution into your super fund within 90 days of receiving the sale proceeds
- You must have owned the home for at least 10 years
- Your home is not a caravan, houseboat, or other mobile home
- The capital gain or loss from the sale of the home is either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT asset (acquired before 20 September 1985)
- You have not previously made a downsizer contribution to your super from the sale of another home or from the part sale of your home.
Work test changes
Previously, if you were aged 67-74, you had to satisfy the ‘work test’ if you wanted to make either a personal concessional, or non-concessional contribution to your super fund.
To pass the work test you must be gainfully employed for at least 40 hours during a consecutive 30-day period in the financial year in which the contributions were made.
Going forward, anyone younger than 75 years old can make non-concessional contributions to their super without satisfying the work test. Caps do apply but you can work with your financial advisor to check eligibility criteria.
The work test still applies to people between 67 and 74 years who wish to make a contribution to super and to claim a tax deduction for it.
Bring-forward rule changes
From 1st of July 2021 the annual cap for non-concessional super contributions is $110,000. If you meet the eligibility criteria, the bring-forward rule can be used to contribute three times this amount at once (being $330,000). The age cap for the bring-forward rule has increased from 67 to 75 from 1 July 2022.
Minimum drawdown rate extensions
When you meet the eligibility criteria and commence a super income stream (otherwise known as a super pension), there is a minimum pension payment percentage you must withdraw from your super fund each year, depending on your age.
The minimum percentage rate was halved in 2020 as part of the government’s response to COVID-19. This reduction will still apply across the 2022–23 financial year.
What does this all mean? There is the potential to take advantage of these super changes to boost your savings, minimise tax and have more money in retirement.
Let’s work together on a retirement and superannuation management plan that makes sense for your circumstances. Speak to a Gold Coast financial advisor from Crest Wealth today.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.
