There have been recent changes made to the rules that surround superannuation that came into effect 1 July 2021 that will affect many Australians.
Contribution Rate Increase
The Super Guarantee (SG) cap rate has increased, affecting many working Australians. The SG cap is the minimum amount an employer is obligated to pay into an employee’s super fund based on their salary or wage (ordinary time earnings). Previous, the rate was set at 9.5%. The SG cap was raised to 10% on 1 July 2021.
Pro Tax Tip: Contractors may fall under SG rules and will need to be paid a contribution based on their labour.
The government has plans to increase the rate to 12% by 2025. The higher contribution rates for local government employees did not change in 1 July 2021.
Contribution Cap Increase
Australians are entitled to pay extra into their super accounts at a lower tax rate. These concessional (before tax) payments, previously capped at $25,000 per annum, have increased to $27,500 per annum for the 2021/22 financial year.
Excess payments made in 2021/22 will no longer incur an Excess Concessional Contributions Charge to the ATO. Marginal tax rates (less a 15% tax offset) on the excess amount will apply.
Maximum non-concessional (after tax) contributions, previously set at $100,000, has increased to $110,000. This may benefit members using the bring-forward rule, allowing non-concessional payments of up to three times the annual non-concessional contributions cap in a single year. Those under 67 years of age, with a super balance of under $1.48M can make a $330,000 payment in a single year.
Pro Tax Tip: Those individuals who brought forward concessional contributions remains capped at $200,000.
Unused amounts under the cap in the next financial year for super funds less than $500,000 can be carried forward. The carried forward amounts will expire after five years.
| Cap Type | 2020-21 | 2021-22 |
| Concessional cap (before tax contributions) | $25,000 | $27,500 |
| Non-Concessional cap (after tax contributions) | $100,000 | $110,000 |
Pro Tax Tip: Individuals making extra payments through their employer should review their employer agreement to include the increased concessional contributions cap of $27,500.
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Age Restrictions Lifted
Age restrictions were increased from 65 to 67 years on bring-forward arrangements. Individuals who were not previously able to access the bring-forward non-concessional contributions cap are now eligible. This will be applied to non-concessional contributions made on or after 1 July 2020.
$450 Threshold
From 1 July 2021, the minimum monthly income $450 threshold is removed. This means that all workers regardless of how much they earn are entitled to receive employer super payments. The removed threshold will affect those aged 18 years and older.
Transfer Balance Cap
The maximum amount of super that can be transferred into retirement phase income streams has been indexed from $1.6 million to $1.7 million. There won’t be a single cap that applied to all Australians. Every individual will have their own personal transfer balance cap of between $1.6 and $1.7 million depending on their circumstances.
Re-contribution of COVID early Release Super
Australian individuals can re-contribute amounts drawn under the COVID-19 early release of super (ERS) programs without the amount counting towards their non-concessional cap. These amounts are not a new type of contribution. It is excluded from the non-concessional contributions cap.
These re-contributions can be made into any fund of the individual’s choice. The amounts should be detailed on a separate approved form and must not exceed $20,000 per approved form.
Higher First Home Super Saver Scheme (FHSS)
Those individuals making voluntary contributions towards super to save for a first home can now access $50,000 of their super savings at a reduced tax rate to pay a deposit on their first home. Current caps were $15,000 per year and $30,000 in total.
Voluntary payments will increase to sacrifices of up to $50,000 per annum, as a post-tax contribution or through salary sacrifice up to a maximum of $50,000. Each person in a couple can contribute $50,000 each, up to a maximum of $100,000.
Pro Tax Tip: Only salary sacrificed amounts can be withdrawn up to this amount. First home buyer cannot withdraw compulsory savings made on their behalf by an employer.
It’s important to keep track of your superannuation, make sure you’re not paying excess fees and are receiving all of your entitlements. Consolidate all of your super funds into one fund to minimise costs. ITP Accounting Professionals can offer financial advice from their planners to set you up into a fund that will maximise your retirement savings. Phone 1800 367 487 and chat with a friendly professional today.