Insights
Federal Budget 2021 - 22: Superannuation
- Increases to voluntary super contribution caps
- Increase to transfer balance cap
- Removal of work test for voluntary super contributions
- Reduction of eligibility age for downsizer contributions
- Removal of minimum income threshold for super guarantee
- Reduction of eligibility age to make NCCs under the bring-forward rule
- Relaxation of residency requirements for SMSFs and Small APRA Funds (SAFs)
Increases to voluntary super contribution caps
Date of effect: 1 July 2021
The superannuation concessional (before-tax) contribution caps and non-concessional (after-tax) contribution caps will be increased as follows:
| Cap | Old Cap | New Cap |
| Concessional | $25,000 | $27,500 |
| Non-concessional | $100,000 (or $300,000 over 3 years) | $110,000 (or $330,000 over 3 years) |
Increase to transfer balance cap
Date of effect: 1 July 2021
The lifetime limit on the total amount of superannuation that can be transferred into retirement-phase income streams (including most pensions and annuities) has been increased from $1.6 million to $1.7 million.
Removal of work test for voluntary super contributions
Date of effect: 1 July of year after Royal Assent is granted
Currently, people aged 67–74 who want to make or receive voluntary superannuation contributions (i.e. non-concessional or salary sacrifice contributions) must have worked at least 40 hours over a 30-day period in the relevant financial year (or qualify for an exemption).
In future, however, they will be able to make these contributions without meeting this ‘work test’ (subject to existing contribution caps).
The measure will increase flexibility for older Australians saving for their retirement through super.
The government expects the measure to come into effect on 1 July 2022.
(Individuals aged 67–74 will still have to meet the work test to make personal deductible contributions.)
Click here to find out what the experts say about the changes to superannuation.
Reduction of eligibility age for downsizer contributions
Date of effect: 1 July of year after Royal Assent is granted
Currently, if a person is 65 or older and meets the eligibility requirements, they can choose to make a ‘downsizer contribution’ into their super of up to $300,000 (or $600,000 per couple) from the proceeds of selling their home.
In future, the eligibility age will be decreased to 60.
Downsizer contributions do not count towards non-concessional contributions caps.
This initiative will encourage more older Australians to consider downsizing to a more suitable home, freeing up housing stock for younger and larger families.
At the same time, downsizers can grow their savings in a concessional tax environment — up to 15% in accumulation phase or 0% in retirement phase.
The government expects the measure to come into effect on 1 July 2022.
Important timing and notification requirements apply to downsizer contributions, so you may wish to talk to one of our financial planners before making a contribution.
Click here to find out what the experts say about the changes to superannuation.
Removal of minimum income threshold for super guarantee
Date of effect: 1 July of year after Royal Assent is granted
Currently, an employee who has ordinary time earnings of up to $450 per month is not eligible for employer super contributions (the Superannuation Guarantee, or SG).
That threshold will be scrapped, which means all employers must pay their employees the SG, regardless of how much they earn.
The government estimates that 300,000 people will receive additional SG payments, 63% of whom are women.
Click here to find out what the experts say about the changes to superannuation.
Reduction of eligibility age to make NCCs under the bring-forward rule
Date of effect: 1 July of year after Royal Assent is granted
Currently, super members under the age of 65 on the prior 1 July can make three years’ worth of non-concessional (after-tax) contributions in one year by bringing forward the contributions caps of the next two years.
In other words, they can make a single contribution of up to $300,000 (or, from 1 July 2021, up to $330,000).
In future people aged 67–74 will be able to take advantage of this bring-forward rule.
It’s not known how this proposal will interact with legislation currently before parliament which proposes to increase the eligibility age to under 67 (this measure is proposed to commence from 1 July 2020).
Click here to find out what the experts say about the changes to superannuation.
Relaxation of residency requirements for SMSFs and Small APRA Funds (SAFs)
Date of effect: 1 July of year after Royal Assent is granted
The government will relax residency requirements for SMSF and small APRA-regulated funds that are used to determine eligibility for tax concessions. It will:
- extend the central control and management test safe harbour from two years to five years — allowing decisions to continue to be made while the trustees are temporarily outside of Australia for a longer period
- remove the active member test — enabling members to continue to contribute to their super fund while temporarily overseas.
If you’re unsure about the regulations, speak to one of our financial planners; it could save you a big tax bill.
If you’re overseas for an extended period, you should also consider whether it’s appropriate to appoint an enduring power of attorney.
Click here to find out what the experts say about the changes to superannuation.
Expert insights
Get a Budget breakdown from our experts — an accountant, financial planner, and economist — and find out what the changes and opportunities are for you. Click here to learn more.
The end of financial year is just around the corner, which means now is the time to act if you want to have a successful return. Click here to know how you can make the most of your tax time before or after 30 June.
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