There are 3 certainties in life, death, taxes and superannuation changes!
For 2021/2022 there have been a few changes made to the superannuation system that you may have missed in all the Covid chaos, so here they are!
How much can I contribute?
There are 2 common ways to contribute to super (there are a few more complicated methods via business sales for example, but I will keep this as simple as we can).
Concessional – or taxable
What does that mean?
This is the contribution either made by your employer or yourself if self-employed, or you can simply make it yourself.
- The percentage your employer contributes has gone up to 10%.
- The annual cap you can contribute without paying additional tax is $27,500 (up from $25,000).
- Concessional contributions are taxed at 15% up to this limit. More if you contribute over the limit.
Non-Concessional – or tax free
You can add money to super that you have in savings or from inheritance etc. The limit is now $110,000 per annum or you can contribute 3 years in one go $330,000 (up from $100,000 and $300,000).
Before you make this contribution, check if you have contributed to super in the past few years.
Previously if you were over 65 years old, you need to work to contribute to super – this has now changed to 67 years old and there is a proposal to change to 75 years old!
The work test is simply being gainfully employed for 40 hrs in a 30-day period during the financial year.
Downsizer contribution – if you sell your home, you may be able to contribute more
The minimum age for the downsizer contribution will be lowered from 65 years old to 60 years old (note this comes in on 1 July 2022).
This allows those nearing retirement to make a one-off post-tax contribution of up to $300,000 per person (or $600,000 per couple) when they sell their family home.
Downsizer contributions can be made after the sale of a person’s principal place of residence, held for a minimum of 10 years.
If you sell a house, you may be able to add another $300,000 per person, there are several criteria to meet.
Increase in super transfer limit for retirement pensions
The maximum amount of super that you can transfer into a retirement pension account will increase by $100,000 from 1 July 2021. Currently you can transfer up to $1.6 million from your super into a retirement pension account. This will change to $1.7 million to meet the rising cost of living. It will not apply to everyone though.
The main benefit of moving your money from a super account into a retirement pension is you do not pay tax. This is because the earnings you generate from your investments are tax-free.
The table below highlights the various conditions.
|First transfer date*||Transfer amount||Transfer balance cap from 1 July 2021|
|On or after 1 July 2021||Up to $1.7 million||$1.7 million|
|Before 1 July 2021||Less than $1.6 million||$1.6 million – $1.7 million|
|Before 1 July 2021||$1.6 million||$1.6 million|
Confused /need advice?