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July 2022 Super Tax Changes

Super Tax Legislation changes July 2022

Legislation has finally been passed to give effect to several of the key super changes proposed in the 2021 Federal Budget. The changes do not come into effect until 1 July 2022, but they will provide significant opportunities for people to make additional super contributions. 

The legislated changes include:

Removal of Work Test in some circumstances

From 1 July 2022 the work test will no longer need to be met by individuals aged between 67 and 75* when making: 

  • salary sacrifice contributions, and  
  • personal super contributions like non-concessional after-tax contributions, spouse contributions, and CGT Concession contributions 

The work test will still need to be met (or work test exemption applied) to claim a tax deduction for concessional personal contributions.

*Please note that the contributions must be received by the fund no later than 28 days after the end of the month in which the person turns 75.

Changes to Bring-Forward NCC eligibility

Individuals will be able to utilise the 3 year NCC bring forward arrangement during a financial year, if they were aged less than 75 on 1 July of that year, subject to meeting all relevant eligibility criteria including Total Super Balance Cap.

Note that the contribution must be received by the fund no later than 28 days after the end of the month in which the person turns 75. However, if you turn 75 in June then the contribution must be made before 30 June to satisfy the requirement that you are under 75 on 1 July of the current year.

We also note that no tapering requirement was implemented so a 75 year old person can utilise the Bring Forward rules in full and so contribute 3 years’ worth of NCC’s at age 75 (even though they wouldn’t have been allowed to make contributions at age 76 & 77).

Downsizer Contributions age

From 1 July 2022, eligibility to make Downsizer Super Contributions from your home sale proceeds has been extended by reducing the minimum age to those 60 & over instead of 65 & over at the time of making the contribution which has to be within 90 days of settlement.

This change provides additional contribution opportunities for individuals aged 60 to 64 who are constrained by their Total Super Balance cap or have already maximised their NCC contributions.

First Home Super Save Scheme – increased release amount

Currently, up to $30,000 of voluntary super contributions can be released (along with associated earnings) and used for a deposit on a first home. This amount will increase to $50,000, plus associated earnings from 1 July 2022.

The limit on contributions that can be made annually (within ordinary contribution caps) will remain at $15,000.  

While this change increases the total amount that can be invested for a home purchase in a concessionally taxed environment, the annual limit of $15,000 on contributions that can be made and later accessed under the scheme means that to use the scheme to its full extent:

  • investments will need to be made over a longer period of time, and 
  • higher income earners who have more of their CC cap utilised by SG contributions will need to make voluntary contributions over a greater number of years.

Summary

The amendments do provide a range of new contribution opportunities for people who thought the super door was permanently closed to them.  And, they provide additional opportunities for people who:

  • have a large taxable component in super (vs tax-free);
  • are in receipt of an inheritance or selling assets in retirement and would benefit from boosting super savings;
  • are aged 60-64 and selling a property they owned for 10+ years that was at some stage their Main Residence;
  • are members of a couple aged 67+ where one spouse has (or is expected to) fully utilise their Transfer Balance Cap; 
  • want to maximise their non-estate assets for Estate Planning purposes; or
  • want to save up for a first home deposit.

So, if you want to see how these changes could be used to maximise your personal superannuation contribution strategies please contact us for an appointment.

Please remember that the most effective pre-retirement planning needs to start at least 5-10 years before you retire!

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