February 2022 update
Welcome to our first update for 2022, in which we outline the key super measures that have recently been passed by both Houses of Parliament. Once Royal Assent is given, most of these changes will apply from 1 July 2022
Changes to the Work Test
The work test requires individuals over the age of 67 to be gainfully employed for a minimum of 40 hours in a 30-day consecutive period. This definition has not changed – what has changed is when the work test needs to be applied.
The rules for members aged 67 to 75 are essentially as follows:
|Current Rules||New rules from 1 July 2022|
|Members wishing to make personal deductible contributions must satisfy the work test.||No change to this rule.|
|Members must satisfy the work test in order to be able to make non-concessional contributions up to the annual cap of $110,000 or to make salary sacrifice contributions.||The work test no longer needs to be satisfied to make non-concessional contributions up to the annual cap of $110,000 or to make salary sacrifice contributions.|
Note: that there are no changes to the contribution rules for members over the age of 75 – they can still only receive mandated contributions (generally the Superannuation Guarantee amount of 10% or some other amount as dictated by an industrial award).
At this point, it may be worth the reminder that from 1 July 2021 the concessional contributions cap increased from $25,000 to $27,500, and that the non-concessional contributions (‘NCCs’) cap increased from $100,000 to $110,000. Eligibility to make NCCs is still subject to being below the Total Superannuation Balance cap as at the 30 June prior (the cap was $1.6m up to 30 June 2021, $1.7m from 1 July 2021).
Bring Forward Rules
Removing the work test for NCCs has the flow on effect of extending the opportunity to use the bring-forward provisions. What this means is that members up to the age of 75 (previously 67) are now eligible to make use of this provision.
There is no change to the fact that an individual’s capacity to make use of this rule is impacted by their Total Superannuation Balance – as per the following table:
|Total Superannuation Balance||NCCs and bring forward available |
(from 1 July 2021)
|Less than $1.48 million||3 years ($330,000)|
|$1.48 – < $1.59 million||2 years ($220,000)|
|$1.59 – < $1.7 million||1 year ($110,000)|
|$1.7 million or more||Nil|
The eligibility age to make downsizer contributions will reduce from 65 to 60 years of age.
The two most significant issues with reducing the age of eligibility are:
- that anyone who contributes prior to the age of 65 will have to meet a condition of release to access the benefit; and
- those who use it early will need to consider how the contribution impacts other contribution strategies (an individual’s capacity to make a downsizer contribution is not impacted by their Total Superannuation Balance, whereas the capacity to make non-concessional contributions is, so careful planning may be required).
Exempt Current Pension Income (‘ECPI’)
Trustees will be able to choose their preferred method of calculating ECPI (proportionate or segregation) when they have member interests in both accumulation and retirement phases for part, but not all, of the income year.
Unlike all the other measures passed, this one comes into effect from 1 July 2021.
First Home Super Saver Scheme (‘FSSS’)
The maximum allowable withdrawal that can be made under the FHSSS will increase from $30,000 to $50,000 for anyone that requests a determination from 1 July 2022. More information about the scheme can be found here.
Superannuation Guarantee Eligibility – Income Threshold Removed
The $450 per month income threshold under the which employees do not have to be paid the superannuation guarantee by their employer will be removed. This is expected to improve equity in the system for casual and part-time workers.
As always, don’t hesitate to contact one of the friendly Greenlight Super Services team members if you require further assistance on (02) 6273 1066.
This newsletter is for general information only. Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described. The newsletter has been prepared without taking in to account any personal objectives, financial situation or needs. The information contained is correct as of 17 February 2022.