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While a number of superannuation and retirement measures were announced, most of these are either changes or adjustments to existing measures. In a long-awaited move, the government will abolish $450 minimum monthly income threshold, which prevents many low paid women, in particular, from receiving compulsory super contributions.
In a change to an existing measure, the maximum withdrawal threshold for the existing First Home Super Saver Scheme will be increased to $50,000, from $30,000. This scheme does not allow first home buyers to withdraw any of their compulsory super savings, only voluntary savings qualify for release.
In another change to an existing measure, retirees who downsize their family home will be able to contribute $300,000 to superannuation ($600,000 for couples) at age 60, down from 65.
The budget will also abolish the work test, which requires those aged between 67 and 74 to be gainfully employed for at least 40 hours over 30 consecutive days during the financial year before concessional or non-concessional superannuation contributions can be made.
SUPER MEASURES IN DETAIL:
This is a welcome and long overdue measure and an important step in the long journey to removing all of the barriers in the system which prevent some workers from receiving compulsory super contributions.
The $450 monthly threshold prevents an estimated 300,000 low paid workers, 63% of whom are female, from receiving mandatory employer super contributions. The removal of this threshold will ensure this cohort of workers are paid super.
It should also be noted that at current SG rates, anyone earning just under the threshold would be eligible for $42.75 per month in superannuation. The cost to government for this measure would therefore be limited solely to the Low-Income Superannuation Tax Offset (LISTO) payable.
Proposed start date: 1 July 2022
Cost: $31.5m Factsheet
In another change to an existing measure, retirees who downsize their family home will be able to contribute $300,000 to superannuation ($600,000 for couples) at age 60, down from 65. This contribution is classified as a non-concessional (post-tax) contribution and is allowed in addition to existing super rules and caps including the total super balance cap of $1.6 million (to rise to $1.7 million on 1 July). The measure is exempt from the work test however but it is not exempt from the $1.6 million (to rise to $1.7 million on 1 July) transfer balance cap (which limits the amount of money you can put into a pension phase account where the earnings are tax free).
Cost: nil Factsheet
The Government proposes to increase to $50,000 the maximum amount of voluntary contributions aspiring home buyers can take from the First Home Super Saver Scheme.
This scheme allows people to make voluntary contributions to superannuation to save for their first home. At present these contributions are capped at $15,000 a year and $30,000 in total.
Under the proposed changes, contributions into a super fund will be allowed by salary sacrifice up to a maximum of 50,000 in total. Where there is a couple involved, both individuals will be able to utilise their caps up to a maximum of $100,000.
The Government will make four technical changes to the legislation underpinning the First Home Super Saver Scheme (FHSSS) to improve its operation as well as the experience of first home buyers using the scheme. These four changes assist FHSSS applicants who make errors on their FHSSS release applications by:
The increased threshold is proposed to start on 1 July 2022. There is no change to the tax treatment of these payments.
This scheme relates to voluntary contributions only. First home buyers cannot withdraw any part of their compulsory super savings – that is, super contributions made on their behalf by their employer - under the scheme.
Cost: $25 m Factsheet
The budget will abolish the work test, which requires those aged between 67 and 74 to be gainfully employed for at least 40 hours over 30 consecutive days during the financial year before concessional or non-concessional superannuation contributions can be made.
This will allow individuals aged 67 to 74 years (inclusive) 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 have to meet the work test to make personal deductible contributions.
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.
Proposed start date: 1 July 2022
Cost: $33.7m Factsheet
The Government will provide $11.2 million over four years from 2021-22 (and $3.1 million per year ongoing) to support stronger consumer outcomes for members of superannuation funds by providing:
The funding for this initiative will be partially met through an increase in levies on regulated financial institutions.
Proposed start date: 1 July 2021
Cost: $11.2 million
The Government will provide $11.0 million over four years from 2021-22 (and $1.0 million per year ongoing) to the Australian Taxation Office to administer the transfer of unclaimed superannuation money directly to KiwiSaver accounts (the New Zealand equivalent of Australian superannuation funds.
Proposed start date: 1 July 2021
The Australian Government is providing transitional funding for the equal sharing of the costs of reimbursing New South Wales police officers who incur an additional tax liability from making voluntary superannuation contributions that exceed the statutory cap on concessional contributions. Funding will cover liabilities incurred from 2016-17 to 2019-20 with reimbursements made in arrears over a five-year period. The funding will also contribute to the cost-sharing of any fringe benefits tax that results from reimbursing police officers in these situations
Period covered: 2016-2020
The Government will shortly introduce enabling legislation to deliver the Improving the Visibility of Superannuation Assets in Family Law Proceedings measure, which was announced as part of the 2018 Women’s Economic Security Statement. The Government is building an electronic information sharing mechanism between the Australian Taxation Office (ATO) and the Family Law Courts to allow superannuation assets to be readily identified during family law proceedings. Allowing the ATO to provide this information to the Courts will ensure more just and equitable superannuation splitting outcomes.
Proposed start date: Not provided
To help support women’s economic security, the Government is investing $10.7 million over two years to streamline the process and provide lawyers to assist with mediation to distribute property of less than $500,000 between parties and after separation following a relationship breakdown. The proposal will help women achieve financial security and control, recover financially from separation, and move on with their lives.
A two-year period will be provided for conversion of market-linked, life-expectancy and lifetime pension and annuity products. Importantly, it will not be compulsory for individuals to take part.
Retirees with these products who choose to will be able completely exit these products by fully commuting the product and transferring the underlying capital, including any reserves, back into a superannuation fund account in the accumulation phase. From there they can decide to commence a new retirement product, take a lump sum benefit, or retain the funds in that account.
Any commuted reserves will not be counted towards an individual’s concessional contribution cap and will not trigger excess contributions. Instead, they will be taxed as an assessable contribution of the fund (with a 15 per cent tax rate), recognising the prior concessional tax treatment received when the reserve was accumulated and held to pay a pension.
Products NOT covered:
The flexibility of the Pension Loans Scheme is being improved by providing access to advance payments through allowing participants to access up to 26 fortnights’ worth of top-up payments as a lump sum and introducing a No Negative Equity Guarantee.
No Negative Equity Guarantee will mean that borrowers under the PLS, or their estate, will not owe more than the market value of their property, in the rare circumstances where their accrued PLS debt exceeds their property value. This brings the PLS in line with private sector reverse mortgages.
12 May 2021