The Australian Government has announced that older Australians in SMSFs will be able to contribute earnings or savings directly into superannuation funds with the repeal of the “work test”.
As part of the May 2021 Federal Budget, new changes will enable individuals aged between 67 to 74 years to make or receive non-concessional including under the bring-forward rule or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution caps.
Individuals aged 67 to 74 years will still be required to meet the work test if they are wanting to make personal deductible contributions.
The measure will come into effect at the start of the first financial year after Royal Assent of the enabling legislation, which the Government expects to have occurred prior to 1 July 2022.
At the present time, Australians aged 67 to 74 years can only make voluntary contributions both concessional and non-concessional to their superannuation account, or receive contributions from their spouse, if they are working at least 40 hours over a 30-day period in the relevant financial year.
“Removing the requirement to meet the work test when making non-concessional or salary sacrifice contributions will simplify the rules governing superannuation contributions and will increase flexibility for older Australians to save for their retirement through superannuation,” the Australian Government said in its budget papers.
Australians aged between 67 and 74 years of age will also be able to access the non-concessional bring forward arrangement, subject to meeting the relevant eligibility criteria.
The existing $1.6 million cap on lifetime superannuation contributions will continue to apply (increasing to $1.7 million from 1 July 2021). The annual concessional and non-concessional caps will also continue to apply.
Access to concessional personal deductible contributions for individuals aged 67 to 74 will still be subject to meeting the work test.
The federal government outlined that retirees aged 70 today potentially had 20 years or more in the workforce before compulsory superannuation was introduced in 1992.
“That is why the Government will amend the work test rules to allow retirees who have not had the benefits of compulsory superannuation throughout their working lives to get more out of the superannuation system,” the federal government stated.
“This change builds on the Government’s previous reforms to the age rules on superannuation contributions, further increasing the ability of older Australians to make contributions to their superannuation” said the federal government in its budget papers.
As part of the 2021 Federal Budget, The Australian Government has also announced that businesses part-time and casual employees will now have to pay for their superannuation as the government discontinues the $450 minimum income threshold.
Under the current rates, employees earning under $450 a month are not required to be paid the superannuation guarantee by their employer.
The proposed changes will result in seeing 300,000 workers across Australia receiving additional SG payments each month. It is estimated that 63 percent of the 300,000 workers are women.
The Australian Government expects the measure to be implemented on the 1st July 2022 and is estimated to decrease the underlying cash balance by $31.5 million over the forward estimates period.
“This measure will improve equity in the superannuation system by expanding the superannuation guarantee coverage for cohorts with lower incomes,” said the government in its budget papers.
The federal government will also pause the early release of superannuation to victims of family and domestic violence.
The federal government also announced that the downsizer scheme will be available to Australians over the age of 60. This will allow them to contribute up to $300,000 into their superannuation if they downsize their home, thus freeing up more housing stock for younger Australian families.
The Government also announced that it would enhance the Pension Loan Scheme by offering immediate access to lump sums of around $12,000 for singles, and $18,000 for couples.
These changes coincide with the government moving to increase the maximum amount that can be released under the First Home Super Saver Scheme from $300,000 to $50,000.
The expansion of the federal government’s New Home Guarantee, which will run for a second year and benefit a further 10,000 Australians over the duration of the 2021–22 financial year. The scheme encourages home buyers looking to build or buy a newly built home with a decreased deposit of 5 percent.
The New Home Guarantee was first introduced as part of the 2017–18 budget, the scheme allows taxpayers to make voluntary contributions of up to $50,000 which including before-tax contributions, like salary sacrifice and after-tax contributions can be withdrawn at a later date to buy their first home.