As expected, this year’s Federal Budget has a strong emphasis on job growth and women’s security. From a super perspective, there were some welcome surprises. Following is a summary of the key measures that you should be aware of, noting all measures, other than the proposed changes to legacy retirement products, are expected to commence from 1 July 2022, once they have received Royal Assent.
Repealing the work test for voluntary contributions
Individuals aged 67 to 74 (inclusive) will be able to make non-concessional (including under the bring-forward rule) or salary sacrifice contributions without meeting the work test, subject to existing contribution caps and existing total superannuation balance limits.
Reducing the eligibility age for downsizer contributions
The eligibility age to make downsizer contributions into superannuation will be reduced from 65 to 60 years of age. All other eligibility criteria remains unchanged, allowing individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000, per person, from the proceeds of selling their home. These contributions will continue not to count towards non-concessional contribution caps.
Relaxing residency requirements for SMSFs
SMSFs and small APRA funds will have relaxed residency requirements through the extension of the central management and control test safe harbour from two to five years. The active member test will also be removed, allowing members who are temporarily absent to continue to contribute to their SMSF.
Removing the $450 per month threshold for superannuation guarantee eligibility
The Government will remove the current $450 per month minimum income threshold, under which employees do not have to be paid the superannuation guarantee by their employer.
Legacy retirement product conversions
Individuals will be able to exit a specified range of legacy retirement products, together with any associated reserves over a two-year period. The specified range of legacy retirement products includes market-linked, life expectancy and lifetime products, but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme.
Currently, these products can only be converted into another like product and limits apply to the allocation of any associated reserves without counting towards an individual’s contribution cap.
Social security and taxation treatment will not be grandfathered for any new products commenced with commuted funds. Amounts commuted from reserves will be taxed as an assessable contribution but will not count towards an individual’s concessional contribution cap or give rise to excess contributions.
This measure will take effect from the first financial year after the date of Royal Assent of the enabling legislation.
How can we help?
If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2021-22 Federal Budget, please feel free to give me a call on 02 8236 4444 to arrange a time to meet so that we can discuss your particular requirements in more detail, or refer to the SMSF Association’s trustee education platform, SMSF Connect.