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Superannuation Updates: No More Work Test!

Work test repealed for voluntary superannuation contributions

 

Date of effect
The first financial year after Royal Assent of the enabling Expected to be 1 July 2022
Individuals aged 67 to 74 years will be able to make or receive non-concessional or salary sacrifice superannuation contributions without meeting the work test. The contributions are subject to existing contribution caps and include contributions under the bring-forward rule.

 

Currently, the ‘work test’ requires individuals aged 67 to 74 years to work at least 40 hours over a 30 day period in a financial year to be able to make voluntary contributions (both concessional and non-concessional) to their superannuation, or receive contributions from their spouse.

 

Personal concessional contributions will remain subject to the ‘work test’ for those aged between 67-74.

 

Expanded access to ‘downsizer’ contributions from sale of family home

 

Date of effect

The first financial year after Royal Assent of the enabling legislation Expected to be 1 July 2022

The eligibility age to access downsizer contributions will decrease from 65 years of age to 60.
Currently, downsizer contributions enable those over the age of 65 to contribute $300,000 from the proceeds of selling their home to their superannuation fund. These contributions are excluded from the existing age test, work test and the $1.7 million transfer balance threshold (but will not be exempt from your transfer balance cap).

 

Both members of a couple can take advantage of the concession for the same home. That is, if a couple have joint ownership of a property and meet the other criteria, both people can contribute up to $300,000 ($600,000 per couple).

 

Downsizer contributions apply to sales of a principal residence owned for the past ten or more years.

 

Sale proceeds contributed to superannuation under this measure will count towards the Age Pension assets test.

 

SMSF residency tests relaxed

 

Date of effect
The first financial year after Royal Assent of the enabling legislation Expected to be 1 July 2022
The residency rules for Self Managed Superannuation Funds (SMSFs) and small APRA regulated funds (SAFs) will become more flexible. This will involve extending the safe harbour period for the central control and management test from two to five years for SMSFs and eliminating the active member test for both types of funds.

 

This change will enable SMSF and SAF members to contribute to their super while temporarily overseas, (as members of large APRA-regulated funds can do).

 

To qualify as a complying superannuation fund and receive tax concessions, an SMSF must meet the criteria of an Australian Superannuation Fund. Failure to meet this definition could result in the fund losing its compliance status, subjecting its assets and income to taxation at the highest marginal tax rate.

 

This measure will enable SMSF and SAF members to keep and continue to contribute to their fund while predominantly undertaking overseas work and education opportunities.

 

SMSF legacy product conversions

 

Date of effect
The first financial year after Royal Assent of the enabling legislation

Individuals can exit certain legacy retirement products with associated reserves for two years, including market-linked and lifetime products (except large APRA-regulated or public sector defined benefit schemes).

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 caps.

The measure will permit full access to all of the product’s underlying capital, including any reserves, and allow individuals to potentially shift to more contemporary retirement products.

 

This will be a voluntary measure and not a mandated requirement for those individuals who hold these legacy accounts.

 

Social security and taxation treatment will not be grandfathered for any new products commenced with commuted funds and the commuted reserves will be taxed as an assessable contribution.

 

Early release of super scheme for victims of domestic violence not proceeding

 

The Government is not proceeding with the measure to extend early release of superannuation to victims of family and domestic violence.

 

Technical changes to First Home Super Saver Scheme

 

Technical changes will be made to the First Home Super Saver Scheme to reduce errors and streamline applications. These include:

  • Increasing the discretion of the Commissioner of Taxation to amend and revoke FHSSS applications
  • You can edit or withdraw your FHSSS application before receiving funds and reapply later.
  • The Tax Commissioner can return FHSSS funds to super funds if not yet paid to the individual.
  • Money returned by the Tax Commissioner to super funds is non-taxable and doesn’t affect contribution caps.
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