1 July 2022 and superannuation contribution changes
Several key super changes which may impact your ability to contribute to your SMSF, took effect from 1 July 2022. These changes create opportunities for all SMSF members, young and old, to grow their 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, will no longer need to meet a work test to make voluntary, non-deductible, contributions
- Individuals up to the age of 75, with a total super balance under $1.7 million, will 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 will reduce to 60, allowing more individuals to use the proceeds from the sale of their home, to fund their retirement
- The Superannuation Guarantee (SG) rate will increase to 10.5% p.a. for all and the $450 minimum income threshold for SG contributions will be removed
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 had worked at least 40 hours over 30 consecutive days in the financial year, or you satisfy the recently retired test. The work test must be met prior to contributing.
From 1 July 2022, this work test will only apply 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 will be able to meet the work test at any time in the financial year.
This means that the work test will no longer apply to contributions you make under a salary sacrifice arrangement or for any personal contributions that you don’t claim a tax deduction for, such as non- concessional contributions.
Non-concessional Contribution
Previously, only if you were under the age of 67 on 1 July of the financial year, could you make non-concessional contributions which exceed the annual $110,000 non-concessional contributions cap. 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 was under $1.48 million as at 30 June of the previous financial year, or $220,000 if your total super balances was 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.
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 simply must be made, no later than 28 days after the month in which you turn 75.
Downsizer Contributions
Previously, you could only make a downsizer contribution if you are 65 or older at the time of the contribution and have 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.
How can we help?
Navigating your way through the superannuation contribution rules can be very complex, especially in the lead up to a member’s retirement. If you would like to know more please feel free to give Jason McLaren a call on 07 3338 8966. Jason is a licenced financial planner and can provide you with personalised financial advice through our other business Flow Financial Planning.
