Proposals from the 2021 Federal Budget in relation to superannuation have now passed legislation and will come into effect on 1 July 2022. Benefits include savings opportunities and tax reduction measures especially for people aged 60+ and first home buyers.

Benefits to people aged 60+:

• Individuals aged between 67 and 75 will no longer be required to complete a work-test for non-concessional contributions (NCCs) and salary sacrifice contributions. The work test will still need to be met to claim a tax deduction for personal contributions.
• Individuals aged under 75 will now be eligible to make NCCs at the beginning of the financial year under the bring-forward rule.
• Individuals aged over 60 can now make downsizer contributions. In 2021/22 and prior years, downsizer contributions could only be made by a person 65 or older at the time of the contribution.

Removal of the work test and the extension of the bring-forward rule will provide recontribution (that is a contribution to super of money already released to you from super) and tax opportunities to super members.

• Recontributions can reduce death benefit tax when proceeds are expected to be paid to a non-tax dependant.
• Where a death benefit becomes payable to a beneficiary and they wish to either hold the funds in accumulation, or run a single account-based pension (because they already have their own member pension), the beneficiary may cash the death benefit from super before recontributing to super.
• Where one member of a couple has or is likely to fully utilise their Transfer Balance Cap (TBC), they may withdraw funds from accumulation and recontribute to a spouse’s account to maximise combined retirement phase interests. Withdrawal and recontribution to an older spouse’s account to manage Total Super Balance (TSB) will not change contribution eligibility for a younger spouse.

Benefit to First Home Buyers:

• The maximum amount of voluntary contributions made to super that can be released under the First Home Super Saver Scheme (FHSSS) has increased. 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.
• The limit on contributions that can be made annually (within ordinary contribution caps) will remain to be $15,000.

This benefit is significant for First Home Buyers. If voluntary confessional contributions (CCs) are made, this may reduce income tax in the year that the contribution is made, which effectively increases the amount that could be saved for a home deposit. Actual earnings within the fund are taxed at the concessional rate of up to 15%, compared to the marginal tax rate which could be up to 47%.

If you think you are eligible for these benefits, we recommend that you seek advice prior to July 1 so that you can build your strategy and ultimately maximise your savings and reduce your tax. To speak to our Financial Services team and to make a compiemntary initial Discovery meeting, please email mail@adviceco.com.au

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