On 10 February 2022, Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021 passed both houses and will become law once the Governor General gives it Royal Assent. The Bill contained six measures, five of which were super related. We’ve covered these measures in previous blog articles, but summarise them below:
Removing the monthly minimum threshold for salary or wages to count towards the superannuation guarantee
Section 27(2) of the Superannuation Guarantee (Administration) Act 1992 (SGAA 1992) is repealed, with effect from 1 July 2022, to remove the current $450-a-month threshold before an employee’s salary or wages count towards the Superannuation Guarantee (SG).
Removing the $450-a-month threshold will expand the coverage of the SG to eligible employees earning salary or wages less than $450 in a calendar month from a single employer. Employers will need to adjust their payroll systems to ensure that the $450 SG threshold is removed from 1 July 2022. This increases an employer’s payroll liability where they have casual employees who were earning less than $450 a month and prior to 1 July 2022 was not required to contribute 10% of their salary and wages to superannuation.
First home super saver scheme maximum releasable amount
The maximum amount of voluntary contributions made over multiple financial years that are eligible to be released under the First Home Super Saver Scheme has been increased from $30,000 to $50,000. Voluntary contributions made from 1 July 2017 up to the existing limit of $15,000 per year will count towards the total amount able to be released.
This change applies to requests made on or after 1 July 2022 for the (ATO) Commissioner to make a First Home Super Saver determination.
Reduced eligibility age for downsizer
Currently, individuals aged 65 and above can make a downsizer contribution to their superannuation plan from the proceeds of selling their home. The eligibility age for downsizer contributions will decrease from 65 to 60 from 1 July 2022.
The eligibility age is tested at the time the contribution is made to the superannuation fund and not the time their home is sold (contract date), or when settlement occurs.
Work test reforms for superannuation contributions
The Bill amends the Tax Act, with effect from 1 July 2022, to introduce a new provision that will apply the ‘work test’ to individuals aged between 67 to 75 years who wish to claim a deduction for personal superannuation contributions.
It’s important to note that the change is step 1 of a 2 step process to repeal the existing work test that applies to non-concessional and salary sacrifice contributions for the purpose of the contribution acceptance rules in the SIS Regulations. The Federal Government has previously advised of their intention to table the relevant legislative instrument to make the required amendment to the SIS regulations to remove the ‘work test’. However, given an impeding Federal Election and the current planned sitting days, the window of opportunity is quickly narrowing.
Effectively, the ‘work test’ from the SIS Regulations has been inserted into the Tax Act in relation to a member contribution, made from 1 July 2022, that will be claimed as an income tax deduction. The work test exemption for individuals with a prior total superannuation balance (TSB) of less than $300,000, that is included in SIS sub-regulation 7.04(1A) has also been effectively included in the new provision, again with effect from 1 July 2022.
This means that from 1 July 2022, an individual, aged from 67 up to 28 days after the end of the month in which they turn 75, will only be able to claim an income tax deduction for a personal superannuation contribution where:
- They had been gainfully employed for at least 40 hours in any period of 30 consecutive days during the income year in which the contribution was made; or
- All of the following are satisfied– the individual:
- Met the ‘work test’ in the previous income year;
- had a total superannuation balance (TSB) of less than $300,000 at the end of the previous income year;
- had not deducted a contribution in the previous income year or any earlier income years on the basis of this exemption (the less than $300k TSB rule). That is, like the rule that currently exists in the SIS Regulations, the individual can only use it once.
Amendment to the bring forward rule for non-concessional contributions
There has also been a change to the cut-off age for the bring forward rule in relation to non-concessional contributions. From 1 July 2022, the cut-off age will be increased from 67 to 75.
This means that individuals aged 67 to 74 years (inclusive) who were not previously able to bring forward non-concessional contributions due to their age may do so, starting in the 2022-23 financial year. It also presents an opportunity to effectively utilise an individual’s non-concessional cap in a future year where the member was over age 75 and the trustee would not generally be able to accept a personal contribution. Refer to our blog article ‘Treasury confirms super boost for those approaching 75’.
Segregated current pension assets – ECPI choice measure
The exempt current pension income (ECPI) calculation rules in the Tax Act are amended to allow SMSF trustees to choose how to calculate exempt current pension income (ECPI) where the fund has both retirement phase and non-retirement phase interests and a period of ‘deemed segregation’. This measure will apply from the current 2021-22 income year. That is, preparers of financial statements and tax returns for SMSFs that meet the relevant requirements will need to consider the ECPI calculation options under this measure when attending to the annual compliance requirements for an SMSF in respect of the 2021-22 and following income years.
You can refer to our previous blog article ‘ECPI choice measure introduced to Parliament’ for further information on how this measure will operate. We will also be holding future education events to analyse the new rules, consider the opportunities and work through the practical approach from an administration and compliance perspective.