While there were a few sweeteners in the budget which will potentially allow clients to get more of their hard-earned money inside super, for most clients it will be business as usual. Here is what you need to know as you head into year-end.Join our newsletter
The only change to contribution caps is due to indexation: the concessional contributions cap for 2020/21 remains at $25,000, increasing to $27,500 from 1 July 2021. And the non-concessional contributions cap for 2020/21 remains at $100,000 for those with total super balances of less than $1.6m at 30 June 2020, increasing to $110,000 from 1 July 2021 for those with total super balances of less than $1.7m at 30 June 2021.
There were no changes to the total super balance “thresholds”. For example, the:
- $300,000 limit for qualifying to make a “work test exempt” contribution.
- $500,000 limit for utilising unused concessional contributions cap amounts carried forward from prior years.
- $1.4m, $1.5m and $1.6m thresholds at 30 June 2020 for non-concessional contributions cap amounts under the “bring-forward rules” (changing to $1.48m, $1.59m and $1.7m at 30 June 2021 as a result of indexation of contribution caps only).
We are still waiting for Parliament to pass the change to allow those turning 66 and 67 to trigger “bring forward mode” for contributions made on or after 1 July 2020. Given their proposal to extend the bring-forward rule to include individuals aged 67 to 74 years (see our contribution blog here), we may see the original announcement dropped but hopefully more will be known when Parliament returns this week.
The rate of superannuation guarantee will increase as legislated to 10% on 1 July 2021 (and then increase 0.5% each year until it reaches 12% from 1 July 2025).
No extension was announced to the current halving of the pension draw down rates (for account-based pensions, transition to retirement income streams and market linked pensions). Full draw down rates will return from 1 July 2021.
The general transfer balance cap remains at $1.6m (increasing to $1.7m on 1 July 2021). It was hoped that, like the concessional contributions cap, the indexation of $100k would be made available to all, however, the onerous formula used to determine whether a member’s personal transfer balance cap is $1.6m, $1.7m or somewhere in between, still applies.
Conditions of release remain unchanged, including what constitutes ”compassionate grounds”. The proposal to make provision for victims of domestic abuse to be eligible to withdraw up to $10,000 from their superannuation has been abandoned by the Government. Similarly, no further extension for those financially impacted by COVID to access their superannuation was announced.
Our Free Post Budget Webinar will give you the opportunity to delve deeper into some of the items that were covered in the Federal Budget. You can register here.