As expected, this year’s Federal Budget has a strong emphasis on job growth and women’s security. From an SMSF perspective, there were some welcome surprises for SMSF trustees, the key measures that you should be aware of are outlined below.
All measures outlined below, other than the proposed changes to legacy retirement products, are expected to commence from 1 July 2022, once they have received Royal Assent.
Repealing the work test for voluntary contributions
Individuals aged 67 to 74 (inclusive) will be able to make non-concessional (including under the bring-forward rule) or salary sacrifice contributions without meeting the work test, subject to existing contribution caps and existing total superannuation balance limits.
Reducing the eligibility age for downsizer contributions
The eligibility age to make downsizer contributions into superannuation will be reduced from 65 to 60 years of age. All other eligibility criteria remains unchanged, allowing individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000, per person, from the proceeds of selling their home. These contributions will continue not to count towards non-concessional contribution caps.
Relaxing residency requirements for SMSFs
SMSFs and small APRA funds will have relaxed residency requirements through the extension of the central management and control test safe harbour from two to five years. The active member test will also be removed, allowing members who are temporarily absent to continue to contribute to their SMSF.
Removing the $450 per month threshold for superannuation guarantee eligibility
The Government will remove the current $450 per month minimum income threshold, under which employees do not have to be paid the superannuation guarantee by their employer.
Legacy retirement product conversions
Individuals will be able to exit a specified range of legacy retirement products, together with any associated reserves over a two-year period. The specified range of legacy retirement products includes market-linked, life expectancy and lifetime products, but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme.
Currently, these products can only be converted into another like product and limits apply to the allocation of any associated reserves without counting towards an individual’s contribution cap.
Social security and taxation treatment will not be grandfathered for any new products commenced with commuted funds. Amounts commuted from reserves will be taxed as an assessable contribution but will not count towards an individual’s concessional contribution cap or give rise to excess contributions.
This measure will take effect from the first financial year after the date of Royal Assent of the enabling legislation.
How can we help?
If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2021-22 Federal Budget, please call us to arrange a time to meet so that we can discuss your particular circumstances in more detail.
SMSF Options is the home of Australia’s leading Self Managed Super Fund (SMSF) accountants, auditors, and advisers.
Covering all aspects of SMSF, our Gold Coast based team are passionate about what we do and take pride in our expertise. We know when it comes to Self-Managed Super, we can get the best possible outcomes for you and your fund.
Whether you are just starting off, transitioning to retirement or looking at the best way to pass wealth on to the next generation, we will help you maximize the benefits by assisting you with everything from setting up your own fund to looking after the daily administration, lodging your income tax return and arranging the fund audit.
Guy Wuoti – SMSF Options
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.