1 July Superannuation Changes
There are some important superannuation changes coming into effect from 1st July 2022 that impact small business owners and super fund account holders.
The Superannuation Guarantee (SG) will increase by 0.5 percent again to 10.5 percent on 1 July 2022. This follows its rise from 9.5 percent to 10 percent last 1 July 2021.SG – the money that employers must pay to employees in addition to their wages – will continue to increase by 0.5 percent each 1 July until it reaches 12 percent on 1 July 2025. Business owners should ensure that their payroll management is ready and updated from 1st July to avoid any penalties from underpaying super.
The $450 contribution threshold has been removed
Currently, an employer must make SG contributions to your super if you are over 18 and earn more than $450 before tax in a calendar month. On 1 July 2022, this rule will be removed, and employers will be required to make SG contributions to an employee’s super fund regardless of how much the employee is paid. However, anyone under 18 years of age will still need to work more than 30 hours in a week to be entitled to be paid super.
Employees will still need to satisfy other requirements.
Eligibility for downsizer contributions will expand
Currently, you must be aged 65 or above in order to make a downsizer contribution. From 1 July 2022, this age limit will be reduced to 60.
Downsizer contributions allow eligible individuals to make a one-off, post-tax contribution to their super of up to $300,000 from the sale of their home; in a couple, this means each person could contribute up to $300,000. These contributions do not count towards non-concessional contribution caps. Making these contributions is VERY time critical – so always seek advice if you are selling your home.
Partial repeal of the work test
Up until 30th June 2022, an individual aged 67 to 74 can only make voluntary contributions into their super, or receive contributions to their super from their spouse, if they meet the ‘work test’, which requires them to be working at least 40 hours over a 30-day period in the relevant financial year.
From 1 July 2022, individuals aged 67 to 74 will be able to make or receive salary sacrifice contributions and non-concessional contributions without meeting the work test. This creates the opportunity to continue to grow your super balance even after retirement.
The usual contribution caps will still apply, and individuals will still have to meet the work test to make personal deductible contributions.
First Home Super Saver Scheme
The Federal Government introduced the First Home Super Saver Scheme (FHSS) in 2017 to help more Australians save for a deposit. Individuals are currently able to withdraw $15,000 worth of voluntary contributions they’ve made to their super in a financial year, up to a total of $30,000 in contributions (and related earnings) across all years, to buy their first home.
You can use this scheme if you are a first home buyer and both of the following apply:
You will occupy the premises you buy or intend to as soon as practicable.
You intend to occupy the property for at least six months within the first 12 months you own it, after it is practical to move in.
From 1 July 2022, the maximum number of voluntary contributions that can be released under the Scheme will be increased from $30,000 to $50,000.
There is a range of eligibility criteria you must fulfill in order to use the FHSS.
Minimum pension reduction extended
Superannuation members with a Pension account must draw down, or withdraw, a minimum amount each financial year. This amount is a percentage of a member’s account balance, and the percentage is determined by the member’s age
The Government originally reduced the minimum amounts that retired members must draw down from their income accounts by 50 per cent for the 2019/20 and 2020/21 financial years as a response to the Covid-19 pandemic and a falling stock market. This was a temporary measure that aimed to help retired members manage the impact of volatility in global financial markets, by reducing their need to sell investment assets to fund the drawdown requirements.
The Government then extended this reduction for the 2021/22 financial year and recently announced that it would be extended again through the 2022/23 financial year. There is a movement at present to make this reduction permanent.
Whether you are a business owner needing advice about your super obligations, a member of a Self-Managed Super Fund or you have your super with an industry or retail fund, our team at Fox Group can assist with your superannuation enquiries. Get in touch today.