Changes to Australian super in 2021–22
The Australian Taxation Office (ATO) has announced that superannuation contribution caps will increase from 1 July 2021.
In addition, several ‘Your Future, Your Super’ reforms announced in last year’s Federal Budget are due to take effect on that date.
Here’s what you need to know about some of the changes:
Super contribution caps will increase
The ATO has confirmed that, from 1 July 2021, the superannuation concessional (before-tax) contribution caps and non-concessional (after-tax) contribution caps will be increased as follows:
|$100,000 (or $300,000 over 3 years)
|$110,000 (or $330,000 over 3 years)
Also, the total super balance limit over which you cannot make non-concessional contributions has been increased from $1.6 million to $1.7 million.
What are non-concessional contributions?
Maximise your concessional cap
If you’d like to make extra contributions but haven’t already reached the $25,000 concessional cap for 2020–21, you have until 30 June 2021 to do so.
Super-rate will rise
From 1 July 2021, the superannuation guarantee — 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, you should contact your payroll provider to ensure everything is in place to accommodate the change.
Super will automatically follow employees
When an employee changes job, they must nominate their super fund — otherwise 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, members will keep their current super fund when they change jobs.
‘Stapling’, as it’s referred to by the federal government, is designed to help reduce unintended multiple accounts.
This in turn will help reduce members’ paperwork and fees, make it easier for them to track their super, and help them avoid paying multiple insurance premiums.
Underperforming funds will be held to account
From 1 July 2021, MySuper funds will be subject to an annual performance test.
The test will compare the funds’ performance to a benchmark set by the regulator, the Australian Prudential Regulation Authority (APRA).
Underperforming funds will be listed as ‘underperforming’ in a new YourSuper comparison tool (this tool is another of the changes occurring to super in 2021–22).
They will remain listed until their performance improves.
Funds that underperform over two consecutive years will not be allowed to accept new members until their performance improves to an acceptable level.
The testing regime will be expanded from MySuper products to all super products from July 2022.
What are concessional contributions?
Concessional contributions are those made using before-tax dollars; or personal contributions you claim as a tax deduction. There are three types:
- compulsory contributions — before-tax contributions your employer is legally required to make (e.g. superannuation guarantee)
- salary-sacrifice contributions — when you choose to have some of your before-tax income paid into your super account by your employer
- personal deductible contributions — voluntary contributions you make using after-tax dollars (e.g. by transferring money from your bank account into your super) which you then claim a tax deduction on when doing your tax return.
Concessional contributions are usually taxed at 15% (30% if you earn more than $250,000 a year).
This is lower than most personal income tax rates and so these contributions are a tax-effective way to save for retirement.
What are non-concessional contributions?
Non-concessional contributions are contributions made using after-tax dollars and which you do not claim a tax deduction on.
- personal contributions you make into super using your take-home pay — if, for example, your employer doesn’t offer salary sacrificing or you receive money (e.g. an inheritance or redundancy payout) you’d otherwise have to pay tax on at your highest tax rate
- any payments you make into your spouse’s fund, subject to their eligibility
- a government co-contribution of up to $500 (if you’re a low- to middle-income earner who makes an after-tax contribution to super)
- low-income super tax offset of up to $500 (if you earn $37,000 or less and you or your employer make concessional super contributions).
Your ability to make after-tax personal contributions to super depends on your age.
Get a Budget breakdown from our experts — an accountant, financial planner, and economist — and find out what the changes and opportunities are for you.
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