Casual and lower income workers, older Australians, and first–time home buyers were the big winners of the superannuation changes announced in the 2021 Federal Budget.
The changes will see Australian businesses pay increased contributions to their employees, with a rise in the superannuation guarantee rate and the scrapping of eligibility thresholds.
Let’s look at the five most important changes made to superannuation in this year’s budget.
1. Superannuation guarantee rate will rise to 10% on 1 July 2021
The federal government has confirmed that the legislated increase in the superannuation guarantee rate will go ahead, meaning Australian businesses will need to make increased compulsory superannuation contributions to their employees.
From 1 July 2021, the superannuation guarantee rate will increase from 9.5% to 10%. It will rise 0.5% each year thereafter until it reaches 12% by July 2025.
The confirmation comes after the government previously voiced its intention to possibly scrap the rate increase due to the effect that COVID-19 has had on Australian businesses.
The increase on 1 July 2021 will be the first since the 2014/15 financial year.
2. $450 monthly superannuation threshold to be removed 1 July 2022
Australian businesses will need to make superannuation contributions to more employees once the $450 monthly minimum income threshold is removed on 1 July 2022.
Currently, businesses don’t need to pay superannuation to employees who earn less than $450 per month.
The removal of the threshold is designed to ensure part-time, casual, and lower income workers don’t miss out on superannuation payments, making an additional 300,000 workers eligible to receive them.
While the measure is a positive step toward superannuation equity for all Australians, it will undoubtedly place an increased administrative burden on businesses to track and capture any casual working arrangements.
Once the threshold is removed, it will be essential for businesses to ensure they adjust their payroll processes and have the right payroll software in place to meet their superannuation contribution requirements.
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3. Abolition of the ‘work test’ for those aged 67 to 74 years
From 1 July 2022, individuals aged 67 to 74 will no longer have to satisfy the ‘work test’ to be eligible to make non-concessional voluntary superannuation payments and receive salary sacrifice contributions.
Currently, these individuals can only make voluntary contributions to their superannuation (both concessional or non-concessional) if they have worked at least 40 hours in a consecutive 30-day period, during the financial year.
4. Age threshold extended for downsizer contributions
From 1 July 2022, individuals over the age of 60 will be eligible to make downsizer contributions.
Originally introduced in the 2018 Budget, the downsizer contribution currently allows those over 65 to contribute up to $300,000 to their superannuation following the sale of their home. It is a one-off contribution, and eligible individuals are required to have owned their home for the last ten years.
The other eligibility requirements for the scheme remain unchanged.
5. First home buyers can withdraw more from their super
First announced in the 2017 Budget, the First Home Super Saver Scheme is designed to help first home buyers raise a deposit more quickly by tapping into their voluntary superannuation contributions.
Changes to the scheme announced in the Budget will allow first home buyers to access up to $50,000 of voluntary concessional and non-concessional contributions from their superannuation fund, up from $30,000.
Voluntary contributions made from 1 July 2017 up to the existing limit of $15,000 per year will count towards the total releasable amount.
The government plans to enact legislation by 1 July 2022 and the changes are expected to be in place from the following financial year.
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