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Federal Budget Changes to Superannuation in 2022
Following the latest budget announcement, several alterations were made to the superannuation rules. Below is a concise overview of each modification affecting superannuation. These changes predominantly affect individuals preparing for retirement, as well as prospective first home buyers and those ineligible for superannuation benefits due to casual employment.
Change to the work test for voluntary contributions
Effective date: From 1 July, 2022.
Affected clients: Individuals aged 67 to 74 (inclusive).
Individuals aged 67 to 74, encompassing a significant demographic, will now find it easier to make voluntary superannuation contributions, thanks to recent regulatory adjustments. This change eliminates the need to fulfill the work test for eligible contributions, including non-concessional and salary sacrifice contributions, provided they adhere to existing contribution cap limits. However, individuals within this age bracket will still be required to satisfy the work test or obtain a work test exemption for personal deductible contributions.
The Government’s decision to waive the work test requirement aims to streamline super contribution regulations, offering greater flexibility for older Australians to bolster their retirement savings. This move underscores the Government’s commitment to simplifying financial planning processes and empowering individuals to plan effectively for their future.
Reducing the Downsizer contribution eligibility
Effective date: From 1 July, 2022.
Affected clients: Individuals aged 60 plus.
The age requirement for making a downsizer contribution into superannuation will be lowered from 65 to 60 years old, facilitating greater accessibility for eligible individuals.
Initially introduced on July 1, 2018, the downsizer contribution enables qualified individuals to make a one-time, post-tax contribution of up to $300,000 per person into their super from the proceeds of selling their home. Notably, these contributions do not count towards the individual’s non-concessional contribution cap and are not subject to total superannuation balance eligibility criteria.
This adjustment by the Government aims to encourage more older Australians to contemplate downsizing to homes that better accommodate their needs. By doing so, it is anticipated that this measure will contribute to freeing up larger homes for younger families, addressing housing needs across different generations.
First home super saver scheme
Effective date: From 1 July, 2022.
Affected clients: Prospective first home buyers.
Within the current framework of the First Home Super Saver Scheme (FHSSS), the maximum allowable access to voluntary concessional and non-concessional contributions is set to rise from $30,000 to $50,000.
It’s important to note that the established annual limit of eligible voluntary contributions remains unchanged at $15,000. Contributions meeting eligibility criteria, made from July 1, 2017 onwards, will continue to contribute towards the cumulative amount available for release.
Contact our mortgage brokers today for help navigating the FHSSS with your home loan.
Remove the $450 per month threshold for superannuation guarantee eligibility
Effective date: From 1 July, 2022.
Affected clients: Low income and part time workers.
The existing minimum income threshold of $450 per month, exempting employees from compulsory Superannuation Guarantee (SG) contributions by their employers, is set to be eliminated.
This adjustment aims to extend SG coverage to lower-income workers, promoting greater fairness within the superannuation system.
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