Superannuation changes

Superannuation changes…there’s quite a few of them and they will impact both employers and employees. Here’s what you need to know!

Increase to the Superannuation Guarantee (SG) rate:

From July 1 the superannuation guarantee rate is set to rise from 9.5% to 10%. This has been legislated for some time and is an important first step towards a SG rate of 12% by 2025. For employees, this is great news in terms of retirement savings, however the majority of employees will see no change to their take-home pay.

For employers, it is imperative to review employment contracts in order to manage the SG increase appropriately. Changes to contracts should be made under the guidance of HR experts and in agreement with employees. Of note to employers:

  • Where a contract states that total remuneration is $X plus super, then the employee will receive an extra 0.5% superannuation with no changes to their base salary. Changes to the base salary in order to offset the SG increase could be deemed as breaking a contract and could potentially have legal repercussions.
  • If a contract states that total remuneration is $X including super, the employer has the authority (if they choose) to effectively decrease the employee’s base salary to offset the SG increase with the total remuneration package remaining unchanged.

Increase to voluntary super contribution caps:

From July 1 thresholds are also changing for voluntary contributions towards super, allowing Australians to actively work towards a higher retirement savings:

  • The cap for Concessional (before tax) contributions will increase from $25,000 to $27,500;
  • The cap for Non-concessional (after tax) contributions will increase from $100,000 to $110,000.

Further changes from July 2022:

The federal budget, handed down in May, also announced a number of other changes to
superannuation. However, many of these are not scheduled to start for another 12 months.

  • The $450 minimum monthly income threshold will be removed from 1 July 2022, meaning all employees, regardless of how much they earn, will be entitled to superannuation payments. This will be particularly important for many part-time workers, or those with multiple jobs.
  • Changes are also proposed to the First Home Super Saver Scheme (FHSSS), which allows voluntary super contributions in order to save for a first home. Presently, caps are $15,000 per year and $30,000 in total. It is proposed the maximum withdrawal amount will increase to $50,000 from July 2022.
  • The work test for Australians aged between 67 and 74 years is also set to be abolished. Presently, workers must be employed for a minimum of 40 hours in a consecutive 30-day period during the financial year in which they want to make super contributions, whether concessional or non-concessional. The proposed changes will see the work test only applied when an application is made for personal deductible contributions.
  • Also impacting retirees, the eligibility age for downsizer contributions will drop from 65 to 60 years from July 2022. This allows retirees to contribute up to $300,000 to super following the sale of their home.

It is important to remember that any proposed change needs to be legislated before coming into effect, however there certainly look to be some positive changes in helping Australians boost retirement savings. We will endeavor to keep you up-to-date as changes come to light, however please contact one of our offices if you have any questions.

Also feel free to contact us if you have any questions about your superannuation, whether it is a question of how much super is enough, or if you would like to discuss self-managed superannuation funds. We have a team of experts to assist across all areas.

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