On the superannuation side, there is a definite feel of a Budget that aims to clean up some out-of-date rules and restrictions that no longer have a place in super and retirement. Financial Advisor, Alex Dickson summaries the recent changes made in Tuesday night’s Federal Budget announcement.
Work test abolished
The work test will be abolished from 1 July 2022, allowing people up to the age of 74 to contribute after-tax money into super (non-concessional contributions) without needing evidence of regular work.
Super guarantee for low income earners
The minimum monthly income threshold of $450 before super guarantee contributions are payable by employers will be abolished, removing the measure that is seen to unfairly penalize low-income workers.
Option to exit legacy Income streams
People have the option over a two-year period to exit Legacy income stream products such as a Term Allocated Pension. For some, the costs of running these pensions have been more than the pension received.
Downsizer contributions from age 60
Downsizer contributions allow a portion of the proceeds from selling your primary residence to be contributed to super without affecting other contribution caps. The age for making downsizer contributions will be reduced to age 60 from 65 to encourage empty nesters to sell their houses earlier with the goal to increase housing stock for families.
First Home Saver Scheme increase
The First Home Super Saver Scheme has been extended for withdrawals up to $50,000, providing extra support to first home buyers to get a leg into the market.
SMSF residency requirements relaxed
From 1 July 2022, the Government has proposed relaxing the residency requirements for SMSFs and SAFs by extending the central management and control safe harbour test from two years to five years, and removing the active member test altogether, making it easier for people residing overseas to continue contributing to their fund in Australia.
What hasn’t changed
What hasn’t changed is the legislated rise for SGC to be increased to 10% for FY2021-22 and account-based pension minimums will return to normal in FY2021-22.
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