At the risk you have been saturated already with Budget news, it appears the superannuation changes aren’t getting much airplay. The proposed changes mean planning opportunities which is what gets us excited. Here is a high-level summary of the proposals.
The work test for voluntary (non-concessional) contributions is to be removed! This will allow contributions to be made to superannuation up to age 75, subject to existing caps. It will also extend the bring forward provision, whereby three years of the annual cap can be used. This will provide increased flexibility for saving for retirement.
If you are selling your home and meet certain conditions (in the main having owned your home for more than 10 years), you can contribute surplus funds of up to $300,000 per person into superannuation as a Downsizer Contribution. This has been around for a few years now, but the age at which you are eligible for this provision is to be reduced from 65 to 60.
For the young ones saving for their first home, the maximum releasable amount from superannuation funds has been increased from $30,000 to $50,000 under the first home saver scheme. This scheme offers a tax efficient method of saving for your first home, so it is great to see the amount increased.
For casual workers, the removal of the $450 per month threshold for superannuation guarantee eligibility is a win. Previously an employer was not obliged to pay superannuation for an individual whose earnings were less than $450 in a month.
For those who have a legacy retirement income stream that was first commenced prior to 20 September 2007 such as a Market Linked Pension and Life Expectancy pension, you will have the option to commute these income streams. For lifetime pensions, commutation will only be permissible if within a self-managed superannuation fund. This will remove the existing restriction on access to capital and provide the flexibility to take as a lump sum or commence an account-based income stream.
There was no guidance in the Budget as to changes in the minimum required annual pension payments, which were reduced by 50% in the pandemic-induced market meltdown. We’ll be keeping an eye on this one.
Finally, in the Centrelink space, the Government is trying to raise the awareness of the pension loan scheme and changing how it can be accessed. Operating similarly to a reverse mortgage, individuals on the age pension can use the equity in their homes to secure a loan from the Government. Originally these loans were limited to being paid fortnightly with the age pension, but it is proposed that it will be available in lump sum advances.
As always, please feel free to call if you would like to discuss any of the proposals in greater length.