What’s changing for super in the 2021 budget
The federal budget made some big changes to the nation’s superannuation system, meaning you could end up with more money in your super nest egg. Here’s what happened.
While superannuation didn’t get much attention when the federal budget was handed down, there were some pretty significant changes announced that could impact your nest egg. Here’s what you need to know about the changes, and what they could mean for you.
The ‘$450 rule’ has been scrapped
If you’re one of around 300,000 workers who don’t currently get paid any super, you might be cheering one of the big changes announced in the budget.
That’s because the $450-a-month income threshold rule will be abolished before the end of the next financial year. This effectively means that every Australian employee must be paid superannuation, even if they earn under $450 a month. Currently, employers are not required to pay any super to these workers.
The change is especially good news for younger workers and women, with around 200,000 female workers currently receiving no super due to the so-called ‘$450 rule’.
But before you start celebrating, remember the announcement won’t actually come into effect until the first financial year after federal parliament approves changes to the law. The government, according to media reports, expects this approval to occur before July 2022.
First-home buyer boost
There’s also good news if you’re a first home buyer who wants to use your super to get on the property ladder, with the government expanding the First Home Super Saver scheme.
On this point, it announced that contributions from first home super savers, of all ages, will now increase from a max cap of $30,000 to $50,000 to help you save for a first home.
Work test abolished
There are also super-related changes in the budget for seniors, with the one getting the most airtime being the change to the so-called ‘work test’.
If you’re aged 67 to 74, this rule meant you could only make voluntary super contributions if you worked a certain number of hours each year, or met other eligibility requirements.
That’s all set to change after the announcement that, from July 2022, the test will be cut. The result is that people in this age bracket can make non-concessional super contributions, or salary-sacrificed contributions, without working a minimum number of hours.
Pensioners, self-funded retirees to benefit
If you’re a pensioner or self-funded retiree then you’re also set to gain from changes to ‘downsizer contribution’ rules around superannuation.
These rules enable seniors to make a one-off, post-tax contribution to their super of any amount up to $300,000 per person, as long as it’s from the proceeds of selling their home.
At present, downsizer contributions to super can only be made if you’re aged 65 or older, but the government has proposed lowering this age to 60, opening it up to thousands more Australians headed towards retirement.
Additionally, there were also proposed changes to relax the residency requirements for self-managed superannuation funds, enabling them to keep control of their funds for five years, up from two years previously.
If you’re a retiree with an SMSF, the change means that you’ll be able to have greater peace of mind to continue to contribute to your preferred fund while undertaking things like overseas work and education opportunities.
Government sticks super guarantee hikes
While it can’t exactly be described as an announcement from the budget, there was also tacit confirmation of legislated plans to push ahead with increases to the super guarantee.
The super guarantee is the proportion of wages that bosses must contribute to their workers’ retirement savings. It’s supposed to increase half a per cent a year before reaching its final value of 12 per cent by 2025, but there had been rumours of changes to this plan.
However, the budget contained no such announcement, meaning that workers will still get to benefit from the legislated increases all the way through to 2025 when the guarantee hits its maximum level of 12 per cent.
For more information, visit budget.gov.au.
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Information provided in this article is of a general nature only and we have not taken your personal financial objectives, situation or needs into account. We recommend you consider if you need to seek professional financial advice before making any financial decisions.
This article is issued by Simple Financial Choices Pty Ltd (ABN 58 629 890 900; AFS Representative No. 001269407), a Corporate Authorised Representative of True Oak Investments Ltd (ABN 81 002 558 956; AFS Licence No. 238184), as the Sub-Promoter of Simple Choice Super. Simple Choice Super is a sub-plan of the Grosvenor Pirie Master Superannuation Fund – Series 2 (ABN 32 367 272 075; RSE Registration R1001204), which is marketed under two brands – Simple Choice Super and Slate Super. Visit our website or call us on 02 8074 1772 or email us at [email protected] to discuss your superannuation.