Super Rule Changes Starting 1 July 2021
In this article, Milestone’s Senior Adviser Andrew Boulds offers a quick rundown of the changes to Superannuation from 1 July 2021. Superannuation can be complex. It is not easy for individuals to keep up to date with the regulations. Our advisers are here to help you to navigate the changes and look for opportunities to boost your savings.
Rise in the concessional (before-tax) contribution cap
From 1 July 2021, the annual cap for concessional (before-tax) contributions into your super account will rise to $27,500. Over the period 1 July 2017 to 30 June 2021, the annual concessional contributions cap was set at $25,000.
The higher concessional contribution cap means you can contribute more to your super account on a pre-tax basis. It may also allow you to make bigger concessional contributions in future years if you take advantage of unused concessional cap amounts from previous years to make a carry-forward contribution.
Higher non-concessional (after-tax) contributions cap
The increase in the concessional contributions cap means the general non-concessional contributions cap is also increasing from 1 July 2021 to $110,000 per year. From 1 July 2017 to 30 June 2021, the annual non-concessional contributions cap was set at $100,000.
If you’re eligible, you may be able to start a bring-forward arrangement. This allows you to use up to three years of non-concessional contributions caps in a single financial year (3 years x $110,000 = $330,000).
Increase in Super Guarantee percentage
From 1 July 2021, the percentage rate for the Super Guarantee (SG) will increase from 9.5% to 10.0%. Employers will need to contribute additional money into their employees’ super accounts for the higher SG percentage rate.
The SG has been set at 9.5% since 2014 and under the current schedule of legislation.
Increase in the Total Super Balance (TSB) cap
The Total Super Balance cap limits the amount you can contribute post tax to your super and from 1 July 2021 this amount is increasing to $1.7 million. Once your super balance exceeds the TSB, you are unable to make any more non-concessional contributions into your super account.
Increase in the general Transfer Balance Cap (TBC)
The limit on the amount you can transfer from the accumulation phase to a retirement phase pension is increasing to $1.7 million for anyone starting a new pension on or after 1 July 2021.
From 1 July 2017 to 30 June 2021, the general TBC was set at $1.6 million. If you had a transfer balance account of $1.6 million at any time since 1 July 2017, you are not eligible for the $100,000 increase. Transfer balance accounts below the previous $1.6 million cap receive a portion of the increase.
Temporary reduction in super pension minimum drawdowns
The government again reduced the minimum drawdown rates by 50% for account-based pensions and similar products in the 2021-22 income year. The temporary reduction also applied to the 2019-20 and 2020-21 financial years.
Maximum number of members in SMSF increases to six
The Senate passed Treasury Laws Amendment (Self Managed Superannuation Funds) Act 2020, on 17 June 2021 without amendment. Among other things, the Act proposes to amend s 17A(1)(a) of the SIS Act to require an SMSF to have fewer than 7 members (instead of fewer than 5) in order to satisfy the definition of an SMSF.
Besides allowing SMSFs to have up to 6 members, the main change that will occur relates to the signing of a document which will require at least half of the trustees or directors of the trustee company to sign certain fund and regulatory documents. The Act also standardises the wording used in the SIS legislation so that reference to small funds is consistent.
Bring-forward rule extended to age 65 and 66
Older super fund members keen to make larger non-concessional contributions into their super account finally have their wish with the passage of the Treasury Laws Amendment (More Flexible Superannuation) Act 2021. The legislation now allows eligible people aged 65 and 66 to commence bring-forward arrangements and make up to three years of annual non-concessional contributions caps in a single year. The change was backdated to cover contributions made on or after 1 July 2020.
Excess Concessional Contribution (ECC) Charge removed
From 1 July 2021, people exceeding their annual concessional contribution cap ($27,500 in 2021-22), will no longer be liable to pay the ATO’s Excess Concessional Contributions (ECC) Charge. The Treasury Laws Amendment (More Flexible Superannuation) Act 2021 removed the ECC Charge requirement, although anyone exceeding their annual concessional cap will still be issued with a determination and be taxed at their marginal tax rate (less a 15% tax offset) on the excess amount.
Recontribution of COVID-19 early release amounts
The Treasury Laws Amendment (More Flexible Superannuation) Act 2021 also includes provisions allowing individuals who received a COVID-19 early release of up to $20,000 from their super amount to re-contribute it without the money counting towards their annual non-concessional contributions cap. The contributions can be made between 1 July 2021 and 30 June 2030, but must not exceed the actual amount accessed early and cannot be claimed as a tax deduction for a voluntary personal super contribution.
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