by Yvette Goss, Accountant and Superannuation Specialist

There were many proposals announced recently in the Federal Budget regarding superannuation but due to the way superannuation law is enacted in Australia, you may not realise that the earliest that they can come into effect is 1 July 2022.  So as the 2020/21 financial year is coming to an end, let’s focus on the changes to superannuation that we do know will apply from 1 July 2021.

If you are an employer or employee

The Superannuation Guarantee rate will increase to 10% on 1 July 2021.  Employers will need to ensure that their payroll systems are updated to calculate the new rate which has increased from 9.5%.

It is important for employers to remember that if you want to claim a tax deduction for superannuation paid in the financial year, the payment must be received by the super fund by the SG due date or 30 June 2021 if you want to make an early payment.  Payments made to a clearing house (if you use one) must be done by the cut-off date they give you each quarter and for pre-30 June payments.  The only exception to this is if you use the ATO Small Business Superannuation Clearing House.  Once they have accepted your correct instructions and payment, you have met your SG obligations (if paid by the SG quarterly due dates) and you can claim a tax deduction for the payments when they are made.

Just a note that the proposal to remove the $450 per month eligibility threshold to receive superannuation guarantee contributions is not yet law and will not apply until at least 1 July 2022.  We will keep you updated on this.

If you make or receive contributions

You will be happy to know that the contribution caps are increasing on 1 July 2021.

The concessional contributions cap will be increasing to $27,500 from $25,000.  Concessional contributions are:

• Superannuation guarantee contributions from your employer
• Salary sacrifice contributions
• Personal contributions that you are claiming a tax deduction for

Don’t forget there is now a law in place that may apply to you, if your total superannuation balance is less than $500,000, which gives you the ability to carry forward your unused concessional contributions cap amounts to be used in future years for up to five financial years.   It applies to unused cap amounts from the 2018/19 financial year onwards, so if you think this may apply to you and you would like to know more, please contact our office.

Another important step to remember is if you wish to claim a tax deduction for personal superannuation contributions in your individual tax return, you need to give your superannuation fund a “notice of intent to claim or vary a deduction for personal contributions” form.

Once this is received by your superannuation fund, they will issue you with an acknowledgement of the amount you will be claiming as a tax deduction.  We need to see that the acknowledgement has been issued before we can lodge your tax return.  If you want to claim a tax deduction for the 2020/21 financial year your superannuation fund must receive the contribution by 30 June 2021. 

The non-concessional contributions cap is increasing to $110,000 or $330,000 over 3 years (if eligible) from 1 July 2021.  Non-concessional contributions are personal contributions that you are not claiming a tax deduction for.  

The total superannuation balance limit that determines if you can make a non-concessional contribution is also increasing to $1.7 million on 1 July 2021.  Prior to this increase, if your total superannuation balance is $1.6 million or more on the previous 30 June, your non-concessional cap is nil so you cannot make any non-concessional contributions in the following financial year.

If you are aged 67 years or over there are certain conditions that must be met to be able to make a voluntary contribution to superannuation.

If you are thinking of contributing to superannuation you should consider talking to a financial advisor or if you would like to know more about the contribution caps and eligibility rules, please contact our office.

If you receive a superannuation pension

The Government has announced that they will extend the temporary reduction in minimum pension drawdown rates for the financial year ending 30 June 2022.  The reduction to the pension drawdown rates is 50% and the rate that applies to you will depend on your age on 1 July 2021.  Also make sure that you have withdrawn your minimum pension amount for the 2020/21 financial year by 30 June 2021.

The General Transfer Balance Cap, which relates to how much you can put into retirement phase income streams (pensions) and is currently $1.6 million, is increasing to $1.7 million from 1 July 2021.

This increase does not mean that everyone will have access to the $1.7 million cap as it will depend on your own individual circumstances. 

If you are thinking of commencing a pension, we recommend that you consider speaking with a financial advisor.  If you need any further information on the pension drawdown rates or your individual cap amount, please contact our office.  We are always happy to help.

This information is current at the time of publication and further updates may have occurred since that date.  Please contact us for the latest information.