12 May 2021 (Dan Blackman)
As part of the Budget 2021-22, the Morrison Government has proposed a number of key superannuation changes aimed at increasing the ability of Australians to make superannuation contributions and simplification of the superannuation system.
Changes to the work test
From 1 July 2022, the work test will be scrapped for individuals under age 75 who are making non-concessional or salary-sacrificed concessional contributions.
The bring forward arrangements for non-concessional contributions will also be adjusted to cover all contributors aged less than 75 provided they satisfy the relevant eligibility requirements, including their transfer balance caps.
The work test will still apply for individuals aged from 67 to under 75 who wish to access concessional personal deductible contributions.
Extending access to downsizer contributions
From 1 July 2022, the minimum age for accessing downsizer contributions will be reduced from age 65 to age 60.
This budget measure will allow Australians nearing or transitioning to retirement to sell their family home and make a one-off after-tax superannuation contribution of $300,000 each ($600,000 per couple).
The downsizer contribution only applies to the sale of an individual’s principal place of residence, but only if the individual held the property for at least 10 years prior to sale.
While the measure is aimed at improving flexibility for Australians to add to their superannuation savings, the government is also hopeful that it will result in an increase in the supply of family homes.
Temporary opportunity to move out of legacy superannuation products
Retirees who are receiving market-linked, life-expectancy and lifetime pension and annuity products will be able to voluntarily exit these products and roll the proceeds back into the accumulation phase.
Once done, they will have the options to take a lump sum, commence a new retirement product, or retain the funds in the accumulation account.
Members will not be forced to exit existing products, but will instead have the option to do so during a two-year period commencing from the first financial year after the legislation receives assent.
The measure will not apply to flexi-pension products offered by any provider, or lifetime products offered by large APRA-regulated defined benefit schemes or public sector defined benefit schemes.
Therefore, the measure will not be available to pension recipients from the Commonwealth Superannuation Scheme (CSS), Public Sector Superannuation Scheme (PSS), Military Superannuation and Benefits Scheme (MSBS), or Defence Force Retirement and Death Benefits Scheme (DFRDB).
Removal of income threshold for superannuation guarantee eligibility
Workers earning less than $450 per month will become eligible for employer superannuation guarantee contributions.
The measure is expected to take effect from 1 July 2022 and is estimated to provide additional employer funded superannuation contributions for around 300,000 individuals — 63 percent of whom are women.
Relaxing residency requirements for self-managed superannuation funds
Members of self-managed superannuation funds (SMSFs) and small APRA-regulated funds (SAFs) will get more flexibility to contribute to their funds while temporarily overseas for up to five years (increased from two years).
The government is proposing to achieve this through the extension of the central control and management test safe harbour, and the removal of the active member test. The changes are expected to take effect from 1 July 2022.