OrangeIQ will tell you the new changes in the superannuation legislation that the 2022–2023 financial year will bring. That is to say, older working Australians and retirees will be the ones benefiting the most from the changes.
Older working Australians and retirees are key beneficiaries of changes that came into effect on July 1st, 2022. That is to say, the changes provide an opportunity for people to get their money into the tax-effective superannuation environment. In addition, the temporary 50% reduction in minimum age-based superannuation drawdown rates for account-based pensions and annuities has been extended. Now that you know the basics of the new changes in the superannuation legislation, let us move on.
What Are The New Changes That Have Applied To The Super System?
Now that we have explained the basics. Let us move towards explaining what the new changes in the superannuation legislation are. The changes that were applied from the 2022–2023 financial year are as given below:
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Removal Of The Work Test
One of the new changes in the superannuation legislation is the removal of the work test. That is to say, the work test will be abolished for individuals aged between 67 and 74 when making or receiving personal or salary sacrifice super contributions. This increases flexibility for older Australians to save for retirement. Existing annual contribution cap arrangements will still apply.
In addition to that, people aged 67 to 74 will still need to meet the work test if they wish to claim a personal superannuation deduction. They will need to lodge a notice of intent to claim or vary a personal super contribution deduction. The ATO will check if they meet the work test when they lodge their income tax return. The work test is satisfied if a person can prove they were employed for 40 hours during a consecutive 30-day period.
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Lifting The Bring-Forward Rule Age
Of many of the new changes in the superannuation legislation, the second was lifting the bring-forward rule age. Because the work test has been removed, people under the age of 75 can use the three-year bring-forward rule to make non-concessional contributions up to a maximum of A$330,000. But those using the bring-forward rule still need to comply with ATO provisions around the total super balance. The A$1.7 million transfer balance cap governs the amount of super that can be transferred into the retirement phase.
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Lower Age For Downsizer Contributions
The eligibility age to take advantage of the home “downsizer” measure has been lowered from 65 to 60. People aged 60 and up who meet a number of other eligibility needs will be able to contribute up to A$300,000 (couples up to A$600,000) to their super from the proceeds of their primary residence. A downsizer contribution forms part of the tax-free component of a person’s super. It can be made in addition to non-concessional super contributions and doesn’t count towards their personal super contribution limit. It can be done even if the total super balance is more than A$1.7 million.
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Legacy Retirement Product Conversions
For two years, one will be able to move their superannuation. This is from a fixed range of restrictive, outdated pension products to more flexible retirement income choices. Legacy products covered include life expectancy, marked-linked and lifetime offerings that were started before September 20th, 2007 from any provider. Not covered are Flexi-pension and lifetime products from Australian Prudential Regulation Authority-regulated or public sector defined benefit schemes.
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Higher Preservation Age
The minimum age for one to access super if they are retired or want to start transitioning to a retirement income stream has increased. From 58 to 59 for those born between 1st July 1963 and 30 June 1964.
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Increasing The Low Rate Cap
In addition to that, the limit that was set on the number of taxable parts (taxed and untaxed) of a super lump sum that can receive a lower or nil rate of tax changed from A$225,000 to A$230,000. This is for members who have reached their preservation age but are still below 60.
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Increasing The Untaxed Plan Cap
The untaxed plan cap amount, which limits the concessional tax treatment of benefits that have not been subject to contributions tax in a super fund, has increased from A$1.615 million to A$1.65 million. It applies to each super plan from which a person receives super lump sum member benefits. It is used to count the excess untaxed rollover amount. Like the low cap rate, the untaxed plan cap amount is indexed in line with average weekly ordinary time earnings in rounded-down increments of A$5,000.
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Higher Co-Contribution Thresholds
In addition to that, the income thresholds for individuals eligible for a government superannuation co-contribution payment of up to A$5,000 per year have been raised. Those earning up to and including the new lower income threshold of A$42,016 and who meet all eligibility needs outlined by the ATO, can receive the government’s full A$500 co-contribution.
The maximum co-contribution rate has been reduced by 3.33 cents per dollar on income earned above the lower threshold rate. It is not payable after one’s income reaches the new higher income threshold of A$57,016.
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Increased CGT Contributions Cap
The lifetime maximum capital gains tax exemption cap (CGT) on non-concessional contributions made under the small business retirement exemption and/or small business 15-year exemption has increased from A$1.615 million to A$1.65 million. The super CGT cap is the maximum amount of eligible personal contributions individuals can choose to bar from counting towards their non-concessional contributions cap. This cap is separate from other non-concessional super contribution limits.
A Short Summary
Let us summarise the new changes in the superannuation legislation. A key change in the removal of the work test for people aged between 67 and 74 has been implemented. This change allows people under the age of 75 to make non-concessional super contributions of up to A$330,000 using the three-year bring-forward rule.
In addition to that, the eligibility age for home “downsizer” contributions has been lowered to 60. That is to say, eligible people will be able to add up to A$300,000 into their super from the proceeds of their primary residence.
