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Changes to superannuation in 2021–22

Ian Fox
Published by:
Ian Fox
Published on:
June 14, 2021
Modoras Wealth Management (VIC) Pty Ltd ACN 145 368 869
Changes in Superannuation 2021 to 2022

On 1 July 2021 the superannuation guarantee will rise and super contribution caps will increase, among several other changes.

Here’s what you need to know about the changes:

Super guarantee will rise

On 1 July 2021, the superannuation guarantee (SG) — the minimum amount an employer must pay into an employee’s super fund — will increase from 9.5% to 10%.

(It will continue to rise by 0.5% a year until it reaches 12% in 2025.)

If you’re a business owner

If you employ people, you should update your payroll and accounting systems to reflect the SG increase or check your payroll provider has made the updates.

If you use a small business superannuation clearing house

If you intend to claim a tax deduction for super payments you’ve made to employees in 2020–21, those payments must be accepted by the small business superannuation clearing house (SBSCH) on or before 23 June 2021.

This will give the clearing house time to process and distribute the payments to your employees’ super funds before the end of the 2020–21 income year.

Remember to confirm with your employees whether their super fund details need to be updated in your SBSCH account.

If you’re an employee

The 0.5% SG increase doesn’t mean everyone will get an automatic pay increase; it will depend on your employment agreement.

If you’re on a ‘total remuneration’ package (base salary, SG and any other allowances), your take-home pay may fall by 0.5% — to offset the higher SG.

If you’re paid a base salary plus super, your take-home pay may remain the same but your super fund will receive a boost.

If you receive annual pay rises, the 0.5% SG increase may be absorbed into your remuneration review.

Super will automatically follow employees

Currently, when an employee changes jobs they must nominate their super fund.

If they don’t, their new employer will put the employee’s super into a ‘default’ fund selected by the employer (also known as a MySuper fund).

From 1 July 2021, though, employees will keep their current super fund when they change jobs. (Legislation enabling this measure is currently before the Senate.)

‘Stapling’, as it’s referred to by the federal government, is designed to help reduce unintended multiple accounts.
This in turn will help reduce employees’ super paperwork and fees, make it easier for them to track their super, and help them avoid paying multiple insurance premiums.

Employers will be required to ask the ATO to identify the employee’s stapled fund; if none exists, the employer can put the super into their default fund (or a fund specified under a workplace determination or enterprise agreement).

Super contribution caps will increase

The ATO has confirmed that, from 1 July 2021, the annual superannuation concessional (before-tax) contribution caps and non-concessional (after-tax) contribution caps will be increased as follows (assuming you have not already reached your transfer balance cap):

CapOld capNew cap
Non-concessional$100,000 (or $300,000 over 3 years)$110,000^

# Unused cap amounts are available for a maximum of five financial years, after which they’ll expire. The unused concessional cap carry forward only applies to people with a balance of less than $500,000 at the previous June 30.

^ If you’re under 65 years of age at any time in a financial year, you may be able to bring forward three years’ worth of non-concessional contributions — $330,000 — in that financial year. However, if you used the bring-forward rule in 2018–19 or 2019–20, your contribution cap will not increase until the three-year period has passed.

Maximise your concessional cap

If you’d like to make extra contributions and haven’t already reached the concessional cap for 2020–21 (or any of the previous four financial years), you have until 30 June 2021 to make those contributions.

Total super balance will increase

From 1 July 2021, the total super balance threshold increases from $1.6 million to $1.7 million.

Anyone with a balance of $1.7 million or more is not eligible to make non-concessional contributions or receive government co-contributions or spouse contributions.

Transfer balance cap limits will change

Currently, the transfer balance cap (TBC) — the maximum amount of super that can be transferred from your accumulation superannuation account into a tax-free ‘retirement phase’ account — is $1.6 million.

From 1 July 2021, there will no longer be one cap that applies to everyone.

Instead, each individual will have their own personal TBC of between $1.6 million and $1.7 million, depending on their circumstances.

If your superannuation is in accumulation phase before 1 July 2021 — i.e. you have not started drawing pension payments from your super fund — your cap is the fully indexed amount of $1.7 million.

If you’ve started drawing pension payments — i.e. you’ve retired or are transitioning to retirement — your TBC will be calculated proportionately, based on your transfer balance account’s highest ever balance between 1 July 2017 and 30 June 2021.

If your balance ever reached $1.6 million during this timeframe, your cap will continue to be $1.6 million.

If your highest ever balance was $800,000, for example, then indexation only applies to $800,000 (the $1.6 million cap minus your highest balance).

In this case, your new TBC would be $1.65 million after indexation (see full calculation in ‘Case study’ below).

The ATO will calculate your TBC, which you’ll be able to see in your myGov account.

My super is…TBC to 30 June 2021TBC from 1 July 2021
In accumulation phase$1.6m$1.7m
In retirement phase and I reached the $1.6m cap limit between 1 July 2017 and 30 June 2021$1.6m$1.6m
In retirement phase and I have never reached the $1.6m cap limit at any time between 1 July 2017 and 30 June 2021$1.6m$1.6m plus indexation on the difference between your highest ever balance and the $1.6m cap (see ‘Case study’ below).

Case study

Mary started a pension with $800,000 in her transfer balance account (TBA) on 1 July 2018. She receives an inheritance and makes a downsizer contribution. By July 2021 her pension has grown to $1.2 million.

Calculation stepsCalculationValue
Highest TBA balance$800,000
TBC at highest TBA balance$1,600,000
Highest cap proportion$800,000 / $1,600,00050%
Unused cap proportion100% – 50%50%
Proportion of indexed amount50% x $100,000$50,000
Total TBC$1,600,000 + $50,000$1,650,000
Remaining TBC amount$1,650,000 – $800,000$850,000

Minimum drawdown rates will be extended

A minimum amount must be paid (i.e. drawn down) each year for super income streams (i.e. pensions or annuities) you commence on or after 1 July 2007.

There’s no maximum amount which must be paid, unless it’s a transition-to-retirement pension, in which case a maximum of 10% of your account balance applies.

The Australian Government has announced an extension — until 30 June 2022 — of the temporary reduction in the minimum drawdown rates (see table below).

This extension is designed to provide retirees with more flexibility in the wake of COVID-19-induced losses in financial markets, which have hurt their super-account balances.

AgeDefault minimum drawdown rates2019–20, 2020–21, 2021–22 reduced rates
Under 654%2%
95 or over14%7%

Get expert advice

For more information on how the changes to super affect your retirement savings and what you can do to make the most of them, book an appointment with one of our financial planners


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IMPORTANT INFORMATION: This blog has been prepared by Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licences (Number 233209). The information and opinions contained in this presentation is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals’ personal circumstances have been taken into consideration for the preparation of this material. Any individual making any investment or borrowing decisions should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to borrow funds or purchase, sell or hold any particular investment. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of, credit contract entered into or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog may change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.

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