New Super Laws Summarised

New Super Laws Summarised

Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021 has now passed both houses of Parliament. Once it receives the formality of Royal assent it will become law so what does it change?

In the current 2021/2022 Financial Year

SMSF trustees can choose the way in which the fund’s tax-exempt pension income is calculated. This is a large subject and includes a number of exceptions so will be dealt with in a separate article next week.

In the next financial year from 1 July 2022

The work test will still apply for tax deductible personal contributions from age 67 but there are some changes. A tax deduction will only be available for personal contributions made from age 67, up to and including the day that is 28 days after the end of the month in which they turn 75, if:

  • they meet the “work test” during the income year in which the contribution is made, or
  • they met the work test in the previous year, their total superannuation balance at 30 June of that previous year was less than $300,000, and they’ve not previously used the once off “work test exempt” contributions rule.

Note that, where the work test is required to be met, say by a 66-year-old who wishes to make a tax-deductible personal contribution after turning 67, the work test can be satisfied at any time during the financial year including after the contribution has been made.

The work test will not need to be satisfied for;

  • non-concessional contributions (including after tax salary sacrifice contributions though not sure why this was included as salary sacrifice involves working so the work test should have been satisfied in any case)
  • small business CGT contributions
  • contributions relating to structured settlements or orders for personal injuries, and
  • COVID-19 recontributions.

though eligibility to contribute will still cease at age 75.

The non-concessional contribution 3 year bring forward provision will apply right up until age 74 without reduction. That means a 74-year-old, who has not triggered the bring forward provision in the last 2 years and has a previous 30 June total super balance of less than $1.48m, will be able to make a $330,000 non-concessional contribution. Curiously, this brings forward the next two year’s contribution limits, even though no contributions could have been made in those years.

Eligibility for downsizer contributions will be reduced from 65 to 60.

Though not as relevant to SMSFs, the maximum release amount for the First Home Super Saver Scheme will be increased from $30k to $50k and the $450 salary threshold, under which SGC contributions do not need to be made, will be abolished.

These are far reaching changes that present numerous opportunities.