In May, Treasurer Josh Frydenberg delivered the 2021-22 Federal Budget.
The budget proposes changes to superannuation that could see many—particularly those in entry-level, part-time and casual jobs—retire with more.
Super guarantee increasing to 10%
While not a specific budget announcement, we at Hostplus welcome the increase of the super guarantee (SG) from 9.5% to 10%, as legislated. This is the first of several increases scheduled to occur over the next four years, raising the SG to 12% by 2025.
You can see how much this increase could make a difference to your super with Industry Super Australia’s calculator.
Industry Super Australia reports that from the 6.1 million workers who will see their super payments increase, women, those earning under $70,000, and workers aged 20-29 are set to benefit most.
Proposed changes
If legislated, these changes will come into effect from 1 July 2022.
Removing the income threshold
The government announced it is removing the $450 minimum monthly income threshold for the superannuation guarantee. Currently, workers who earn under this amount don’t receive super.
With this proposed change, those on a low income will be able to save more for later in life.
As a super fund that’s committed to helping all Australians achieve the retirement they deserve, this is a welcome step. It will see an estimated 300,000 people who earn low wages, work multiple jobs or part-time or casual hours—63% of whom are women — get a much-needed boost to their super savings.
First home buyers can save more money in their super
The most you can save under the first home super saver (FHSS) scheme is proposed to increase from $30,000 to $50,000 for individuals.
This scheme currently allows people to make voluntary super contributions and then withdraw them, plus any investment earnings, when they’re ready to buy their home.
Contribution flexibility for older Australians
Those aged 67-74 will no longer have to meet the criteria set out in the work test to be able to make voluntary super contributions.
Under the current work test, people in this age bracket must have worked at least 40 hours over 30 consecutive days during a financial year before either concessional or non-concessional contributions can be made.
Downsizer contributions open to over 60s
From 1 July 2022, the downsizer contribution scheme is set to be expanded to those age 60 or over (lowered from 65 or over). This scheme allows people to contribute up to $300,000 (or ($600,000 for couples) from the sale of their home into their super. This downsizer contribution doesn’t count towards the concessional and non-concessional contributions caps.
The work test removal and expanded downsizer contribution measures will mean older Australians have more freedom to boost their super before they retire.
Changed residency requirements for self-managed super funds
The residency requirements for self-managed superannuation funds (SMSFs) are set to be relaxed, allowing SMSF members more flexibility to contribute to their super while temporarily overseas.
Remember, while these measures offer opportunities to grow your super, the changes are not yet legislated.