Forman Financial Services

Federal Budget 2021 – Superannuation

Superannuation Changes

Increasing the maximum releasable amount to $50,000 under the First Home Super Saver Scheme
Under existing First Home Super Saver Scheme (FHSSS) rules, a person can only apply to have up to $30,000 of their eligible voluntary contributions plus a deemed earnings amount released from super to purchase their first home.
However, the Government is intending to increase the maximum releasable amount for the FHSSS from $30,000 to $50,000.
The measure is expected to take effect on 1 July 2022 pending the passage of legislation through Parliament.
What this could mean to you
This could allow you to use the tax concessions associated with super to save an even larger deposit towards the purchase of your first home.
Super Guarantee rate increase going ahead
Notably, the Federal Budget did not mention the legislated increases to the Super Guarantee, leading to the assumption that the changes will take place from 1 July 2021 as planned.
As a result, employers must pay 10% of their employees’ earnings into their nominated super fund from 1 July 2021, up from the current rate of 9.5%.
What this could mean for you
If you’re an employee and receiving Super Guarantee contributions, your employer will start contributing an additional 0.5% of your earnings to super for you from 1 July this year.
Removal of the $450 per month minimum Super Guarantee threshold
The Government has announced its intention to remove the $450 per month minimum Super Guarantee income threshold.
Under the current rules, an employer is not required to pay super guarantee contributions for an employee who earns less than $450 per month.
The measure is expected to take effect on 1 July 2022 pending the passage of legislation through Parliament.
What this could mean for you
If you do a small amount of paid work each month, or you work multiple jobs each paying less than $450 per month, your employer will be required to start paying super guarantee contributions for you. If you are a student studying at university this will also help you start accumulating a retirement nest egg a little earlier.
End of the work test for after-tax contributions for people aged up to 74
People up to the age of 74 will be able to make or receive after-tax (including under the bring-forward rule) or salary sacrifice super contributions without meeting the work test, subject to existing contribution caps.
However, people up to the age of 74 wanting to make personal tax-deductible contributions will still have to meet the existing work test.
The measure is expected to take effect on 1 July 2022 pending the passage of legislation through Parliament.
What this could mean for you
If you’re a retiree under age 75, you’ll have more flexibility to top up your super without needing to work at least 40 hours in 30 consecutive days in a year before making a contribution. Further, your fund will be able to receive salary sacrifice contributions for you without needing to confirm you satisfy the work test first.
Reduction of the eligibility age for downsizer contributions to 60
Anyone 60 years of age and older will be eligible to make a downsizer contribution. The downsizer contribution allows people to make a one-off after-tax contribution to super of up to $300,000 from the proceeds of selling their home they have held for at least 10 years.
Under the rules both members of a couple can make downsizer contributions in respect of the same home, and the contributions do not count towards a member’s non-concessional contribution caps.
The measure is expected to take effect on 1 July 2022 pending the passage of legislation through Parliament.
What this could mean for you
If you’re an eligible couple in your early sixties, you can potentially sell your home to contribute up to $1.26m to super in a year via a combination of $300,000 downsizer contribution and $330,000 non-concessional contribution each.
However, if you’re a person in your early sixties wanting to contribute a much smaller amount, it might be a good idea to see an adviser to get advice on what type of contributions you should make.
For example, if you have $300,000 from the sale of your home that you wanted to contribute to super, you might be better off making a $300,000 after-tax contribution under the bring-forward rules in order to preserve your ability to make a downsizer contribution in the future.
End of the Government’s temporary halving of the account based pension minimums.
In early 2020, the Government made some changes to pension payments that were designed to help people who were under financial stress as a result of some of the economic impacts of Coronavirus. One of these changes was the temporary halving in the minimum amount people were required to take from their pension account. This reduction finishes on 30 June 2021, which means that the standard minimum drawdown requirements will apply from 1 July 2021.
What this could mean for you
If you have been receiving pension payments in 2020–21 that fall below the normal minimum that will be required in 2021–22, you’re likely to see an increase in the pension you receive from July 2021. For example, if your total annual pension payment is currently 2% of your account balance, in the 2021–22 financial year it will increase to 4% of your account balance. Please note that this percentage is dependent on your age on 1 July each year.

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Disclaimer and Warning
The information above is of a general nature only.  It should not be used as a source to make financial decisions.  It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status.  We recommend that if you are looking for advice on this matter, you should contact us.