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Snapshot of changes

  • Removal of $450 monthly income threshold for super contributions
  • Higher withdrawal limit for First Home Super Saver Scheme
  • Removal of super contribution “work test” for those aged between 67 and 74
  • Transfer of unclaimed super to KiwiSaver accounts
  • Lower age threshold for super downsizer scheme

The focus of this year’s Federal Budget is on initiatives designed to maintain and grow Australia’s post-pandemic economic recovery, which has been better than expected.

While a number of superannuation and retirement measures were announced, most of these are either changes or adjustments to existing measures.

The government will remove the $450 minimum monthly income threshold, which prevents many low paid women, in particular, from receiving compulsory super contributions.

In a change to an existing measure, the maximum withdrawal threshold for the existing First Home Super Saver Scheme will be increased to $50,000, from $30,000. This scheme does not allow first home buyers to withdraw any of their compulsory super savings, only voluntary savings qualify for release.

In another change to an existing measure, retirees who downsize their family home will be able to contribute $300,000 to superannuation ($600,000 for couples) at age 60, down from 65.

The budget will also abolish the work test, which requires those aged between 67 and 74 to be gainfully employed for at least 40 hours over 30 consecutive days during the financial year before concessional or non-concessional superannuation contributions can be made.

It’s important to remember that the budget measures outlined need to be legislated before they come into effect. The same applies to the package of super measures announced in last year’s mid-pandemic October budget which remain in Parliament and are still subject to debate.

Further information to some of the measures below can be found in the Treasury budget fact sheets.

For super members

Removal of $450 monthly income threshold

The $450 monthly threshold prevents an estimated 300,000 low paid workers, 63% of whom are female, from receiving mandatory employer super contributions. The removal of this threshold will ensure this cohort of workers are paid super.

Proposed start date: 1 July 2022

New threshold for First Home Super Saver Scheme

The Government proposes to increase to $50,000 the maximum amount of voluntary contributions aspiring home buyers can take from the First Home Super Saver Scheme.

This scheme allows people to make voluntary contributions to superannuation to save for their first home. At present these contributions are capped at $15,000 a year and $30,000 in total.

Under the proposed changes, contributions into a super fund will be allowed by salary sacrifice up to a maximum of $50,000 in total. Where there is a couple involved, both individuals will be able to utilise their caps up to a maximum of $100,000.

This scheme relates to voluntary contributions only. First home buyers cannot withdraw any part of their compulsory super savings – that is, super contributions made on their behalf by their employer – under the scheme.

Proposed start date: 1 July 2022

Work test abolished for those aged between 67 and 74 years

The budget will also abolish the work test, which requires those aged between 67 and 74 to be gainfully employed for at least 40 hours over 30 consecutive days during the financial year before concessional or non-concessional superannuation contributions can be made.

This will allow individuals aged 67 to 74 years (inclusive) to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution caps. Individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions.

The existing $1.6 million cap on lifetime superannuation contributions will continue to apply (increasing to $1.7 million from 1 July 2021). The annual concessional and non-concessional caps will also continue to apply.

Proposed start date :1 July 2022

Transfer of superannuation to the KiwiSaver Scheme

The Government will provide $11.0 million over four years from 2021-22 (and $1.0 million per year ongoing) to the Australian Taxation Office to administer the transfer of unclaimed superannuation money directly to KiwiSaver accounts (the New Zealand equivalent of Australian superannuation funds).

Proposed start date: 1 July 2021

For retirees

New age threshold for downsizers

In another change to an existing measure, retirees who downsize their family home will be able to contribute $300,000 to superannuation ($600,000 for couples) at age 60, down from 65. This contribution is classified as a non-concessional (post-tax) contribution and is allowed in addition to existing super rules and caps including the total super balance cap of $1.6 million (to rise to $1.7 million on 1 July) . The measure is exempt from the work test however, but it is not exempt from the $1.6 million (also rising to $1.7 million on 1 July) transfer balance cap (which limits the amount of money you can put into a pension phase account where the earnings are tax free).

Proposed start date: 1 July 2022

Previous Budget measures scheduled to come into effect on 1 July 2021

The Your Future Your Super measures proposed in last October’s budget (refer to our October 2020 article) – which include a measure that will staple everyone to their current superannuation fund and apply performance testing to many funds – are scheduled to come into effect on 1 July. However, as the legislation is still before Parliament, the final scope of the proposed reforms and their implementation date is not yet known.

New thresholds on 1 July 2021 for some existing measures

While not part of the 2021 Federal Budget announcements, it is worth noting that the thresholds for a number of existing super measures will increase from 1 July 2021. This includes increases to the amount you can voluntarily contribute to super through either salary sacrifice or by making a non-concessional contribution.

The key super rates and thresholds provide that for 2021–22:

  • the concessional contributions cap is $27,500, up from $25,000
  • the non-concessional contributions cap is $110,000, up from $100,000
  • the general transfer balance cap is $1.7 million, up from $1.6 million.