In recognition of the changing nature of work and the ageing demographics of Australia and people working longer, superannuation arrangements will be made more generous from 1 July 2022. Both houses of Parliament have approved these changes and they have become law recently and while we are awaiting the regulations to be tabled, we wanted to explain some of the key changes.
The downsizer strategy has become more common in usage. If you are 60 years old or older and have not previously made a downsizer contribution to your super, you may be eligible to contribute up to $300,000 from the proceeds of the sale of your home into your superannuation fund if you or your spouse have owned your home in Australia for at least ten years. Currently, you have to be aged 65 or older to effect this strategy. From 1 July 2022, the age limit is reduced to age 60. Remember the contribution needs to be made within 90 days of receiving the monies from the sale of the property. If you are contemplating this strategy, please seek advice first.
Tax-deductible contributions into superannuation can now be made up to the age of 75. To make these contributions, you can either satisfy the work test, i.e. be gainfully employed (for income) for at least 40 hours in any period of 30 consecutive days during the financial year. Or, if you cannot satisfy this, you were able to work for 40 hours in 30 consecutive days in the previous financial year and have total superannuation balances of less than $300,000.
Further, after-tax or non-concessional contributions up to $110,000 or utilizing the bring-forward rule, i.e. three years bought forward ($330,000), can also be accessed before you reach age 75. Currently it cuts out at age 67. For example, you could be 74 and have a superannuation balance of less than $1.48 million and contribute $330,000 prior to attaining age 75 under this change.
Once again, if you are contemplating any of the strategies above for your financial planning situation, please seek advice first.
These changes are to be welcomed and genuinely reflect an understanding of the need to accommodate people working longer and the ageing population. Remember, once pensions are commenced in superannuation accounts, all of these monies become tax-free!