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New super rules that have come into play over the past year could be financially rewarding if you qualify. Further changes from 1 July 2020, may also be of benefit to you.
It’s always good to take every opportunity to grow your wealth. New legislation may help you boost your retirement savings.
If eligible, here’s how you can stay on top of changes and help make them work for you.
People with a total superannuation balance of less than $500,000 will be able to carry forward their unused concessional cap space amounts from 1 July 20181. Some conditions and limits apply.
This means if you don’t use the full amount of your concessional contributions cap in a particular year, you can carry forward the unused amount and take advantage of it up to five years later. Amounts that have not been used after five years will expire.
Effectively, unused cap amounts started to accrue on 1 July 2018 and were able to be accessed from 1 July 2019 where they could be contributed to your super for eligible individuals.
Find out more about catch-up contributions.
From 1 July 2019, Australians aged 65 to 74 years with a total superannuation balance below $300,000 are able to make voluntary contributions for 12 months from the end of the financial year in which they last met the work test. This is known as the work test exemption (eligibility conditions and limits apply).
The Australian Tax Office says the work test is applicable once you turn 65 until you turn 75. You must have worked at least 40 hours within 30 consecutive days in a financial year before your super fund can accept any non-concessional contributions for you.
In terms of the amount of money that could be contributed, the existing concessional contribution cap of $25,000 and non-concessional contribution cap of $100,000 continues to apply.
The work test exemption may be used in conjunction with the carry forward of unused concessional contributions.
In the 2019 Federal Budget, the Australian Government signalled its intention to help Australians boost their retirement savings2 by giving them greater flexibility as they near their retirement years. Announcements included:
In addition to the work test exemption, it is proposed that from 1 July 2020 Australians aged 65 and 66 will be able to make voluntary superannuation contributions, both concessional and non-concessional, without meeting the work test. Note that this intention is yet to be legislated.
This means that Australians aged 65 or 66 years who don’t meet the work test, because they may only work one day a week or volunteer, will now be able to make voluntary contributions to their superannuation.
The government said the move aligns the work test with the eligibility age for the Age Pension, which is scheduled to reach 67 from 1 July 2023.
It estimates around 55,000 Australians aged 65 and 66 will benefit from this reform in 2020-2021.
Find out more about the changes to the work test.
Also, from 1 July 2020, the age limit for spouse contributions is proposed to rise from 69 to 74.
Currently, your spouse can make contributions to your account until you reach the age of 70; however, if you are aged 65-69, you must have met the work test before the contribution is made. People aged 70 years and over cannot receive contributions made by another person on their behalf.
The ability to make spouse contributions for a further five years will extend the period a spouse may claim a tax offset for spouse contributions of up to $540 a year.
This is also yet to be legislated.
Find out more about spouse contributions.
In conjunction with the other changes from 1 July 2020, the non-concessional contributions cap bring-forward rule is proposed to be extended to people aged 65 and 66 when legislated.
Current bring-forward arrangements allow those aged younger than 65 years to make up to three years’ worth of non-concessional contributions, which are capped at up to $100,000 a year, to their super in a single year. The proposal is to extend this to people aged 65 and 66.
More details about the non-concessional contributions cap and the current bring-forward arrangements are outlined in our Personal Contributions Guide.
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1. Treasury Factsheet, Budget 2016, Superannuation reform: Allowing catch-up concessional contributions, accessed 22 January 2020 at archive.budget.gov.au/2016-17/factsheets/super/08-SFS-Catch_up_contributions-161109.pdf
2. Media release, 1 April 2019, Australian Government, Treasury, Super boost: more flexibility for retirement at https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/super-boost-more-flexibility-retirement
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