What Super Changes have occurred this financial year?

With the start of a new financial year – brings new rules for superfunds, some recent changes include:

Lifting the age limit on the ‘work test’ requirements to age 67 – extension on age limit

Before 30 June 2020 if someone were aged 65 or older they would be required to meet the ‘work test’ of working 40 hours in a 30 consecutive day period during the financial year in order to make eligible personal superannuation contribution. As per below, from 1 July 2020 this age limit has lifted to age 67, meaning someone aged 65 or 66 is not required to meet the ‘work test’ requirements until age 67 to contribute personally to superannuation.

*SG – Superannuation Guaranteed payments

Ceasing work contributions– extension on age limit

Allows someone age 67 (previously age 65 – last financial year) to make a personal contribution to be made as a ‘once-only’ payment to superannuation in the financial year after they retire and cease employment. The persons total superannuation balance must be less than $300,000 on 30 June in the previous financial year.

Spouse Contributions & Tax offset – extension on age limit

Allows contributions to be made on behalf of an eligible spouse, which is then treated as a non-concessional contribution (NCC) and counted against the spouse’s NCC cap. If the spouse has an adjusted income of less than $37,000 it is possible for the contributor to receive a tax offset of up to 18% on the first $3,000 of any non-concessional spouse contribution. Until 30 June 2020, this contribution was only possible up until age 70. The spouse was also required to meet the work test between age 65-70. From 1 July 2020 this limitation has now been extended to age 67 before requiring to meet the work test. Between age 67 and 75, the spouse must still meet the work test.

Minimum Account Based Pension drawdown – extended for one more year

As introduced in March 2020, the Federal Government reduced the minimum required account based pension drawdown percentage by 50% in response to the COVID-19 pandemic. This change will continue for the current 2020/2021 financial year only at this stage.

As each strategy has specific requirements, eligibility and potential taxation consequences – it is important to seek professional tailored Financial Advice to understand what will work best for you in your circumstances. If you would like to know more, please call Carl Freshwater on (03) 5141 0055.

Superannuation, Wealth Creation