New superannuation contribution opportunities- how can you benefit?

From 1 July 2022, several key super changes took effect which may create new opportunities to grow your retirement savings.

What are the changes?

Originally announced in the 2021 Federal Budget, the following changes apply from 1 July 2022:

  • Individuals up to the age of 74, no longer need to meet a work test to make voluntary, non-deductible and contributions.
  • Individuals up to the age of 75, with a total super balance under $1.7 million, have the opportunity to make large non-concessional contributions (possibly up to three years’ worth) in a single year.
  • The minimum age to make downsizer contributions reduced to 60, allowing more individuals to use the proceeds from the sale of their home, to fund their retirement.
  • The Superannuation Guarantee (SG) rate increased to 10.5% p.a. for all and the $450 minimum income threshold for SG contributions, has been removed.
  • Under the First Home Super Saver Scheme (FHSSS) eligible individuals have access to an extra $20,000 of voluntary contributions to fund a home deposit.

How can you benefit from these changes?

The Work Test

Previously, if you were aged 67 to 74, you could only make voluntary contributions to super if you worked at least 40 hours over 30 consecutive days in the financial year, or you satisfied the recently retired test. The work test had to be met prior to contributing.

From 1 July 2022, this work test only applies to you if you wish to claim a tax deduction for the voluntary contributions you make to your SMSF. If making personal deductible contributions, from 1 July 2022, you are able to meet the work test at any time in the financial year.

What does this mean? 

This means that the work test no longer applies for any personal contributions that you don’t claim a tax deduction for, such as non- concessional contributions.  You can make these contributions up to age 75.  A great opportunity to engage in strategies and build your superannuation balance later in life!

Bring-forward Non-concessional Contribution 

Previously, you could only make take advantage of the bring forward non-concessional contributions rules if you were under the age of 67 on 1 July of the financial year.

  • The bring-forward rules allowed you to make up to $330,000 (i.e. three years’ worth of non-concessional contributions) in a single year if your total super balances were under $1.48 million as at 30 June of the previous financial year, OR
  • $220,000 if your total super balances were greater than or equal to $1.48 million but less than $1.59 million as at 30 June of the previous financial year.

From 1 July 2022, the cut-off age to access the bring-forward rules increased to 75. However, the total super balance thresholds referred to apply above, still apply.

What does this mean?

This means that if you were 74 on 1 July 2022 and you have a total super balance of less than $1.48m, you may be able to have one last boost to your retirement savings by making a $330,000 non-concessional contribution to your SMSF. The contribution must be made, no later than 28 days after the month in which you turn 75.

Downsizer Contribution 

Previously, you could only make a downsizer contribution if you were 65 or older at the time of the contribution and had satisfied the other eligibility requirements.

From 1 July 2022, the minimum age reduced to 60. All other eligibility rules remain unchanged and the maximum amount of downsizer contributions that can be made remains at $300,000 per person or $600,000 per couple.

What does this mean?

If you get the timing right, you may be able to combine a downsizer contribution with the bring forward rules to contribute up to $630,000 to your SMSF, in one year. As a couple this could present a one-off opportunity to boost your retirement savings by $1.26m.

If you are selling your home, please contact your Bentleys advisor to discuss the timing of a downsizer contribution as it is important that your consider the total super balance thresholds and how they impact your other contribution and future superannuation strategies.

Have you got questions about the superannuation contribution changes? Contact your local Bentleys advisor today. These contribution changes could be used in conjunction with other superannuation strategies to ensure your superannuation structure is optimised for your circumstances. We’re here to help you get where you want to be.

Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.

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