There's been a number of significant changes to superannuation this year. We outline the main ones and how you may be affected.
Superannuation Guarantee rises to 10%
One of the biggest changes is that the rate of compulsory super your employer pays into your super fund – the Superannuation Guarantee – is now 10%, up from 9.5%. The SG rate will rise to 12% by 1 July, 2025 in 0.5% annual increments. If you want to check your employer is paying you the right amount, you can use this online tool from the Australian Tax Office.
Increase to before and after-tax contributions caps
Both the concessional (before-tax) and non-concessional (after-tax) contributions caps have increased. The maximum amount of concessional contributions you can now put into your super is $27,500 – for all ages – up from the previous amount of $25,000. The new non-concessional amount is $110,000, up from $100,000.
Since 1 July 2019, if you have a total super balance of less than $500,000 on 30 June of the last financial year, you may be entitled to contribute more than the general concessional contributions cap and make additional concessional contributions using your carry forward unused concessional cap amounts since 1 July 2018.
Depending on your total superannuation balance at the end of 30 June 2021 you may also bring forward up two years non-concessional contribution caps.
You must meet certain requirements to contribute to super.
Making up for any COVID super withdrawals
The federal government allowed people who were financially struggling during COVID-19 to withdraw up to $20,000 over two consecutive financial years from their super fund, as part of the early release program. The scheme finished on 31 December, 2020, when by then, more than 3.5 million Australians had withdrawn $36.4 billion from their accounts. The average amount withdrawn was $7,638 per application.
While this scheme was a lifesaver for many, it also meant their super balance was reduced, but there are ways to get your super back on track:
No more excess concessional contributions charge
From 1 July, 2021, if you exceed the annual concessional contributions cap, you won't need to pay an Excess Concessional Contributions Charge to the ATO. However, you will still be issued with a determination and be taxed at your marginal rate – less a 15% tax offset – on the excess amount.
Also, if you took advantage of the government's COVID-19 early release scheme to withdraw some of your super, you can recontribute the amount without it counting towards your annual non-concessional contributions cap. The amount recontributed can't exceed the amount you accessed and can't be claimed as a tax deduction for a voluntary personal super contribution. You have until 30 June, 2030 to recontribute.
Your Future, Your Super reforms introduced
The Your Future, Your Super reforms came into effect on July 1, 2021, aiming to make superannuation easier for members. One of the key elements of the reforms is fund stapling, where from November 1, 2021, when you start a new job, if you don't nominate a specific super fund, you automatically keep your existing one – if you have one. This means your fund is "stapled" to you as you change employers.
Meanwhile, the "best financial interests" reform is designed to make super trustees more focused on the decisions they make – such as those around expenses – to ensure they're in their members' best interests.
The two remaining key reforms – a fund comparison tool and fund performance test – currently only affect super members who are in default funds. OneAnswer and Integra members won't be affected by these reforms until at least 2022.
Reduction to minimum pension withdrawals extended
The reduced minimum mandatory amount you must withdraw from your pension account each year has been extended to 30 June, 2022. The government temporarily halved the minimum drawdown in March 2020 in response to COVID so pension members could withdraw less of their retirement savings. For those under 65, the minimum annual withdrawal is 2% of their balance, while those aged between 65-74 must withdraw 2.5%. The minimum payments for other age groups can be found here.
You can find more information on super, including calculators to work out how much you need in retirement, here.
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Taxation law is complex and this information has been prepared as a guide only and does not represent taxation advice. Please see your tax adviser for independent taxation advice.
Before re-directing your super or moving your money into your product, you will need to consider whether there are any adverse consequences for you, including loss of benefits (e.g. insurance cover), investment options and performance, functionality, increase in investment risks and where your future employer contributions will be paid. Any investment is subject to investment risk, including possible repayment delays and loss of income and principal invested. Returns can go up and down. Past performance is not indicative of future performance.
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