Improvements to the superannuation system
Federal Parliament has recently passed legislation that will implement a number of measures which will improve the flexibility and equity of the superannuation system, assist first home buyers, and also reduce costs and complexity for self-managed superannuation funds.
Removal of $450 income a month threshold for compulsory superannuation
Previously employers did not have to pay compulsory superannuation for employees who earned less than $450 a month. This $450 threshold has now been removed so that all employees, regardless of the amount of their monthly salaries or wages, will be entitled to receive compulsory superannuation payments. The removal of this threshold will improve equity in the superannuation system and increase the retirement savings of around 300,000 low-income workers employed in casual or part-time roles, around two-thirds of which are women.
First Home Super Saver cap increased from $30,000 to $50,000
From 1 July 2017 under the First Home Super Saver (FHSS) scheme a person could make voluntary concessional and non-concessional contributions to their superannuation fund to save for their first home. Further from 1 July 2018 if the eligibility requirements are met a person could apply to release the voluntary contributions and associated earnings for use in purchasing their first home.
This legislation increases the maximum amount of voluntary contributions that can be released under the FHSS from $30,000 to $50,000 This increase recognises that deposit requirements have increased with house price growth over recent years and this change will help first home buyers to save a deposit more quickly.
Downsizer contributions minimum age changed from 65 to 60
The downsizer superannuation contributions currently enable people aged 65 and over to make contributions of up to $300,000 each when selling their family home houses if they meet all eligibility requirements. This new legislation reduces the eligibility age to make downsizer contributions into superannuation to 60 years of age.
This will allow more Australians nearing retirement to make a one-off post-tax contribution of up to $300,000 per person when they sell their family home.
It will improve flexibility for older Australians to contribute to their superannuation savings. This may encourage more older Australians to downsize to homes that better meet their needs, ultimately increasing the supply of larger homes for young families.
Work test changes for superannuation contributions
Previously if you wanted to make personal contributions to superannuation (excluding downsizer contributions) and were between the ages of 65 and 75, you needed to meet a work test. This new legislation repeals the need to satisfy the work test for making non-concessional contributions but preserves the work test for making concessional contributions for people between the ages of 67 and 75. It also make amendments necessary to allow eligible individuals to make non-concessional superannuation contributions under the bring-forward rule.
These changes will improve flexibility for older Australians to make or receive contributions to their superannuation. It will allow retirees, who have not had the benefits of a mature super system throughout their working life, and may have accumulated savings outside of super, to get more out of the super system.
SMSF segregated current pension assets
The new legislation also provides superannuation fund trustees with greater choice in how they calculate exempt current pension income for funds that have a member who is in both accumulation phase and retirement phase. This will simplify reporting for these funds by streamlining administrative requirements for these calculations.
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