Changes to superannuation and what they mean
We cover key super changes for the 2022/23 financial year, and some of the measures that are staying the same
The start of a new financial year is a good time to check in on new legislation, thresholds, and rates you may need to be aware of when thinking about your retirement and finances. Below we cover some key super changes for the 2022/23 financial year, and some of the measures that are staying the same.
1. The super guarantee contribution rate has increased from 10 to 10.5%. Anyone who is eligible to receive the super guarantee will receive the increased amount from 1 July 2022.
Alongside this, the maximum super contribution base has also increased to $60,220 per quarter (previously $58,920). Meaning, that if you earn over this limit in a particular quarter, your employer is not required to make SG contributions for any earnings above this limit.
2. The $450 monthly income threshold for super guarantee contributions has now been removed. Now anyone earning less than $450 per month (before tax), is entitled to receive super guarantee contributions from their employer. These contributions will be at the new rate of 10.5%. The only exception now is under 18s who work less than 30 hours per week.
3. The minimum age to be able to make a downsizer contribution has been reduced from 65 to 60. Meaning, that those aged 60 and over may be able to use the proceeds from the sale of their home to make a non-tax-deductible contribution into their super. For singles, this can be up to $300,000 and for a couple, up to $600,000 combined. To be eligible for the downsizer contribution, you will need to satisfy the full list of eligibility criteria.
4. The work test rules for older Australians have been changed. Those aged between 67 and 74 are able to make or receive non-concessional or salary sacrifice contributions without meeting the work test. Previously, you were required to show that you were employed (or self-employed) for at least 40 hours over a consecutive 30-day period in the financial year in which the contributions were made.
Non-concessional or salary sacrifice contributions are subject to existing contributions caps and do not apply to personal deductible contributions.
In addition, the bring-forward arrangements, allowing individuals to bring forward two years’ worth of non-concessional contributions (up to a maximum of $330,000 in a financial year), have been extended to those aged 67 to 74. Depending on your age and existing super balance, you may be able to make more non-concessional contributions without having to pay extra tax.
5. The Government has increased the amount of super that may be released under the First Home Super Saver (FHSS) scheme. Eligible contributions that can count towards the maximum releasable amount increased from $30,000 to $50,000 (a maximum of $15,000 for each financial year).
6. The Government’s temporary 50% reduction in the minimum annual pension payment requirement for certain retirement income streams continues for a fourth year. The 50% reduction applies to the minimum annual payment calculated by the superannuation or annuity provider.
7. The income threshold for super co-contributions has increased. To receive the annual maximum entitlement of $500, your total income must be less than the higher income threshold of $57,016 for the financial year, and you must have made personal contributions of $1,000 to your super account.
If you own a business, you may have a high turnover but still, be eligible for the super co-contribution due to your allowable business deductions.
8. The low-rate cap amount has increased to $230,000 (previously $225,000). This is the maximum amount of super lump sum (taxed and untaxed elements) that can be received at a lower (or nil) rate of tax.
This cap applies to those under age 60 who have reached their preservation age. Please note that the low-rate cap amount is reduced by any amount previously applied to the low-rate cap.
9. The CGT lifetime cap amount has increased to $1,650,000 (previously $1,615,000). People who are eligible can exclude some of their personal contributions from counting towards their non-concessional contributions cap. They can do this by electing for the amounts to count instead towards their super capital gains tax (CGT) cap.
Measure staying the same for the 2022/23 financial year:
a. The annual concessional contributions cap remains at $27,500. Concessional contributions are those contributions that are made into your super fund before tax and include your employer contributions (including salary sacrifice contributions) and any personal contributions you claim as a tax deduction.
However, those with a total superannuation balance below $500,000 may be eligible to carry forward unused concessional caps from previous financial years.
b. The annual non-concessional contributions cap remains at $110,000, although it may be possible to ‘bring-forward’ up to two further years of non-concessional contributions, up to a maximum of $330,000 in a single year.
c. The general Transfer Balance Cap remains at $1.7 million for this financial year. This is the lifetime limit on the total amount of super that can be transferred into retirement phase income streams, including most pensions and annuities.
For transfer balance accounts held before 1 July 2021, the personal transfer balance cap will be calculated proportionally, based on their highest previous transfer balance account.
The above is a summary of key updates, not an exhaustive list, therefore, prior to making any changes to your financial situation, it is important to consider how appropriate these measures may be for you.
Next steps:
- Check-in on your super balance to see whether any of these measures may apply to you
- Use the article links to visit the ATO website for further reading
- Talk to an accountant or financial planner before you implement changes to your financial situation.
