by Yvette Goss, Accountant and Superannuation Specialist.
Superannuation laws seem to be continually changing and some of the Federal Budget measures that were proposed last year have now been passed into law, so let’s look at what will apply from 1 July 2022.
If you are an employer or employee
The Superannuation Guarantee percentage will increase to 10.5% on 1 July 2022. Employers will need to ensure that their payroll systems are updated to calculate the new rate which has increased from 10%.
The $450 wages per month eligibility threshold to receive Superannuation Guarantee (SG) contributions will no longer apply from 1 July 2022. There are still other eligibility rules that need to be met, such as employees under 18 years of age will need to work more than 30 hours per week before SG contributions need to be paid. Employers will need to check that their payroll system takes this into account, as some employees who have never needed SG contributions to be paid will now be eligible. Employers should also check that they have superannuation fund information recorded for these employees.
Due to the introduction of Single Touch Payroll (STP), it is important now more than ever for employers to make sure that SG contributions for employees are paid at the correct amount and on time. The ATO is using STP and information provided by super funds to identify employers who are not meeting their SG obligations and they have recently commenced requesting non-complying employers to complete a Super Guarantee Charge Statement and pay fees and interest on the overdue/unpaid amounts.
The SG contributions must be received by the super fund by the SG due date or 30 June 2022 if you want to make an early payment and claim a tax deduction. Therefore, payments made to a clearing house (for example via Xero Auto Super) must be done by the cut-off date they give you each quarter and for pre-30 June payments. The only exception to this is if you use the ATO Small Business Superannuation Clearing House. Once ATO have accepted your correct instructions and payment, you have met your SG obligations (if paid by the SG quarterly due dates) and you can claim a tax deduction for the payments when they are made.
If you receive a superannuation pension
The Government is further extending the temporary reduction in minimum pension drawdown rates for the financial year ending 30 June 2023. The reduction to the pension drawdown rate is 50% and the rate that applies to you will depend on your age on 1 July 2022. Also make sure that you have withdrawn your minimum pension amount for the 2021/22 financial year by 30 June 2022.
Please get in contact with our office if you wish to confirm what your minimum amount is and to discuss if you have satisfied the minimum pension withdrawal requirement.
If you make or receive contributions
There are no changes to the contribution caps from 1 July 2021, so these are the numbers that you need to know for the 2022 and 2023 financial years.
The concessional contributions cap is $27,500. Concessional contributions are:
- Superannuation guarantee contributions from your employer
- Salary sacrifice contributions
- Personal contributions that you are claiming a tax deduction for
Don’t forget there is now a law in place that may apply to you, if your total superannuation balance is less than $500,000, which gives you the ability to carry forward your unused concessional contributions cap amounts to be used in future years for up to five financial years. It applies to unused cap amounts from the 2018/19 financial year onwards, so if you think this may apply to you and you would like to know more, please contact our office.
Another important step to remember is if you wish to claim a tax deduction for personal superannuation contributions in your individual tax return, you need to give your superannuation fund a “notice of intent to claim or vary a deduction for personal contributions” form. If you are going to commence a pension with the contribution or are transferring your super to another super fund, you need to give your fund this notice first before that occurs.
Once this is received by your superannuation fund, they will issue you with an acknowledgement of the amount you will be claiming as a tax deduction. We need to see that the acknowledgement has been issued before we can lodge your individual tax return. If you want to claim a tax deduction for the 2021/22 financial year, your superannuation fund must receive the contribution by 30 June 2022.
The non-concessional contributions cap is $110,000 or $330,000 over 3 years (if eligible). Non-concessional contributions are personal contributions that you are not claiming a tax deduction for.
The total superannuation balance limit that determines if you can make a non-concessional contribution is unchanged at $1.7 million. As of 1 July 2021, if your total superannuation balance is $1.7 million or more on the previous 30 June, your non-concessional cap is nil so you cannot make any non-concessional contributions in the following financial year.
If you are aged 67 to 74 years of age
We have some good news for you! There have been some changes to the work test requirement for voluntary contributions into super. From 1 July 2022, the work test requirement will be removed for non-concessional and salary sacrifice contributions if you are aged 67 to 74. If you wish to claim a tax deduction for the contribution you will still need to meet the work test which is:
be gainfully employed at least 40 hours in a consecutive 30-day period in the financial year that you make the contribution.
The ATO will now determine if you have met the work test when you lodge your tax return.
If you are over 60 and selling your home
The eligibility age to make a Downsizer Contribution will reduce to 60 years or older (down from 65) from 1 July 2022.
A Downsizer Contribution allows up to $300,000 per person ($600,000 per couple) from the proceeds of the sale of your home to be contributed to super and not be counted towards your non-concessional contributions cap.
To be eligible, in addition to the age requirement, the home must be in Australia and have been owned for at least 10 years, was your main residence for at least part of the time it was owned and the contribution needs to be made within 90 days of receiving the sale proceeds. There is a form that needs to be completed and given to your super fund before or at the time of the making the contribution.
You can only do a Downsizer Contribution once and you can do one no matter how much you have in super. You don’t even need to be actually “downsizing” as such, just selling your home. If you would like more information about the Downsizer Contribution, please contact our office. We recommend that you speak to your financial advisor if you are considering making one.
The information provided is general in nature and you we recommend you speak to your financial advisor if you are considering contributing to superannuation.
This information is current at the time of publication and further updates may have occurred since that date. Please contact us for the latest information.