Superannuation Changes

The new financial year has kicked off with a raft of new and promising changes to Superannuation that could supercharge your retirement savings.  The long awaited changes to concessional contributions (CC), non-concessional contributions (NCC) and general balance caps are now legislated so it’s important to understand the new rules and how you can make the most of them.

Concessional Contribution Opportunities

The combination of an increase in Super Guarantee (SG), indexation of the CC Cap and removal of excess CC charge create significant opportunities to tax effectively boot your retirement savings.

For the first time in five years, the CC Cap has increased from $25,000 to $27,500.  In addition, the SG rate has increased from 9.5% to 10% for employees.  Although the CC cap allows an extra $2,500 for employees, the increase in the SG rate, which counts towards the CC cap, takes up part of the free space.  For example, if you are on $100,000, $500 of your “extra” CC Cap will be used up by SG contributions from your employer.  It’s worth checking with your employer whether the increase in SG is being paid on top of your base salary, or if your base salary will be offset by the increase.  One extra bonus is that the CC excess charge, for exceeding your limit has been abolished from July 2021, so there is no sting in the tail!

One of the best features, is that any unused CC cap can be rolled forward for five years, as part the Catch-up CC provision.  As long as your total super balance is under $500,000, you can use up any unused cap from the 1st of July 2018 start date, and contribute in the 2021/2022 financial year.  This can be a great way for anyone who has had a large capital gain, as they can contribute and may be eligible to claim a tax deduction.

You can maximise you’re your CC Cap by making a personal deductible contribution, to use up any unused Cap space.  Simply lodge your notice of intent to claim a tax deduction before filing your tax return for 2020-2021, or by 30 June 2022 (whichever is earlier).

Couples can take advantage of contribution splitting, dependant on their fund restrictions.  It’s a great way to equalise Super balances between spouses.  Spouses can split 85% of the CC for this financial year, or the individuals CC cap for 2021-2022 (whichever is less).  This is a great strategy to use if the receiving spouse is under the age of 65, or not retired if above the preservation age.

Non Concessional Concessional Opportunities

Not only has the non-concessional contribution cap (NCC) now increased to $110,000 and the general transfer balance cap to $1.7M, but it now possible for those under 66 to use their bring-forward provision to contribute up to $330,000 using the NCC cap in 2021-2022.  Additionally, if that bring forward is triggered while they are 66, it is possible to use their remaining cap over the next two years, even though they turn 67 and 68 respectively.  It is in the works to expand this bring-forward provision to all those under the age of 74, however this has not yet been legislated.  The increase in age to 66 for triggering the bring-forward provision and contributing without meeting the work test opens up a lot of different options to maximise your super balances.

As at 1 July 2021, the ability to receive a tax-offset for making a spouse contribution will be extended to those with TSB up to $1.7million.  If the spouse’s income is less than $37,000 pa, and at least $3,000 is contributed into their super, the contributor is eligible for the maximum offset of $540, and it declines to nothing for those earning more than $56,112pa.  This is great way to even out the balances between spouses and receive a little bonus tax offset along the way.

A great initiative will allow anyone who withdrew super monies that were accessed on compassionate grounds during COVID, to recontribute those monies without impacting their NCC cap up until 30th of June 2030.

Other opportunities

Downsizer contributions are a great way for those over the age of 65 to contribute to Super after selling their home, regardless of their plans for future home purchases.  The temporary reduction in the minimum drawdown rates will be extended for another year until June 30, 2022, which will help to preserve monies in Super for longer.  Larger families with self-managed super funds now have the ability to increase the number of members from four to six, so they may be able to consolidate fees and make their fund more efficient.

It’s great to see so many new and tax-effective strategies for boosting our Super balances, but it’s important to remember that these opportunities are not suitable for everyone, so carefully consider your own circumstances and seek professional advice.

If you have any questions, or unsure how the changes might impact you, please get in touch – the team at Apollo is always here to help.

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