Superannuation Pension – Minimum Drawdown Relief Extended
The temporary 50% reduction to the minimum income drawdown from superannuation pensions has been extended until 30 June 2022.
This measure helps to minimise the need to sell down assets in depressed markets, and has been extended due to the impact of the Covid-19 crisis on some retirees’ superannuation account balances.
For the 2021-22 financial year, the proposed minimum pension drawdown requirements will be:
- Under 65: 2%
- 65-74: 2.5%
- 75-79: 3%
- 80-84: 3.5%
- 85-89: 4.5%
- 90-94: 5.5%
- 95 or more: 7%
Increases to Super Contribution Caps
From 1 July 2021, superannuation contribution caps will increase due to indexation – a positive change that allows for greater superannuation amounts.
- The concessional contribution cap is set to increase from $25,000 p.a. to $27,500 p.a.
- The standard non-concessional contribution cap is calculated as four times the concessional contributions cap, so is set to increase from $100,000 to $110,000.
- The maximum amount a member who was under 67 at the start of the year can contribute under the non-concessional contribution cap bring-forward rule will increase from $300,000 to $330,000.
- The $1.6m non-concessional cap threshold is also changing to $1.7m.
Looking Further Ahead: July 2022 and Onwards
Additional superannuation changes have been proposed and are expected to take effect from July 2022 onwards.
- Work Test Removed for Voluntary Contributions
Currently, individuals aged 67 to 74 years can only make voluntary contributions (both concessional and non-concessional) to their superannuation fund, or receive contributions from their spouse, if they satisfy the work test which requires an individual to work for at least 40 hours over a period of not more than 30 consecutive days.
From July 2022, these individuals will be able to make or receive non-concessional contributions (including under the bring-forward rule) and salary sacrifice contributions without meeting the work test, subject to existing contribution caps. This change will allow older Australians more flexibility in accumulating superannuation. The work test will still apply for these individuals to make personal deductible contributions.
- Reducing the Age Limit for Downsizer Contributions
The Government will reduce the age limit from which downsizer contributions can be made by eligible individuals, from 65 to 60 years of age, from July 2022.
The downsizer contribution allows eligible individuals to make a one-off, after-tax contribution to their superannuation fund, of up to $300,000 per person, following the disposal of an eligible dwelling, where certain conditions are satisfied.
- Residency Requirements Relaxed for Self-managed Superannuation Funds
From July 2022, the Government will relax residency requirements for SMSFs and small APRA-regulated funds by extending the central control and management test safe harbour from two years to five years for SMSFs; and removing the active member test for both types of funds.
This measure will allow SMSF members and small APRA fund members to continue to contribute to their superannuation fund whilst temporarily overseas, ensuring parity with members of large APRA regulated funds.
We will be in touch with clients for whom these matters are relevant, however if you have any queries, please do not hesitate to contact me on (02) 9908 9888.