How to make the latest super changes pay off for you

Call it a hangover from the silly season when people look at their empty calendar and decide there's ample time to plan the year ahead when there's just four months left to the end of the financial year.

If you want to boost your super and make the most of its generous tax concessions, you need to keep abreast of the changes to the 2022-23 rules.

"Ensuring you are across the changes earlier in the year will give you time to implement appropriate strategies for your retirement," says Xavier O'Halloran, director of Super Consumers Australia.

"The amount of super your employer must pay you, called the super guarantee, went up from 10% to 10.5% on July 1, 2022, and will continue to rise by 0.5% each year until it reaches 12%. This means your super contribution levels will be increasing each year."

He says it's important to make sure you are receiving the right amount of super. If you make voluntary concessional contributions, don't just "set and forget". Figure out your retirement target and see if you need to make additional contributions to reach it.

"But be aware of any tax implications that may arise if you exceed your annual contributions cap [currently $27,500]. This is particularly so for people who are near the cap and will see their super automatically increase due to the rising SG amounts."

Another key change is you no longer need to earn a minimum of $450 a month, per employer, to get the SG. It's now paid on every dollar you earn.

"Anyone over 18 should earn super on any ordinary time earnings. If you were affected by the threshold, check your super statements to see if you are now receiving contributions," says O'Halloran.

There are also key changes designed to help older people top up their super. Unlike younger workers, many have not had the full benefit of the super system throughout their working lives, leaving them with smaller balances.

"The requirement to meet a 'work test' to prove you were working before making non-tax deductible contributions has been removed for people under age 75. This gives greater flexibility to people who are retired and want to make top-ups to their super. Be aware that there is a $110,000 annual cap for these types of contributions, with penalties for breaching it."

Understanding the rules can be challenging, so ask your super fund for help before you act and check which forms you need to fill it.
Planner Marisa Broome, the principal of wealthadvice, urges people to take their savings seriously.

"We're a country of incredibly unengaged people. Our super system should be celebrated, not ignored. At least once a year look at your payslips. Make sure your employer is making the contribution at 10.5%.

"If you've got any spare money, make your top-up contributions. Don't wait until June 30 when it will miss going into this financial year. Make those decisions now so you've got the time to process it, so you get it right."

She recommends downloading your super fund's app.

"Get more organised - the big industry funds have great apps. Track your super that way.

"Or login to your myGov account, which tracks your super. Ensure you're in a good fund, in the right investment option, with the right level of insurance. It's not hard to do. Once it's set up, it's easy to keep managing it."

O'Halloran adds: "Check the fundamentals of your super fund, such as whether it's a high-performing fund with low fees. The ATO has a super fund comparison tool that could help with this."

The downsizer contribution is especially powerful, says Broome, giving older Australians the ability to give their super a late, big, meaningful boost (see breakout, right).
 Martin Fahy, CEO of the Association of Superannuation Funds of Australia, welcomes the changes. "With a maturing super system, we expect to see a greater proportion of retirees relying less on the age pension and more on their superannuation.

"Given this, it is important that members are assisted to make informed decisions about how to use their super savings to increase their standard of living in retirement.

"The removal of the $450 SG threshold and measures to allow more people to make downsizer contributions will contribute to better long-term retirement outcomes and enable consumers to plan for their retirement with confidence.

"Combined with the legislated move to 12%, more Australians are now on track to be self-funded in their retirement and the fiscal burden of the age pension will continue to be among the lowest of our OECD peers".

Hit a $300k home run

While everyone was partying on January 1, eligibility for the downsizer contribution was further reduced to age 55, giving more people the ability to top up their super from the proceeds of the sale of the family home.

You can contribute up to $300,000, or $600,000 per couple, providing you've owned the family home for at least 10 years. The contribution cannot exceed the sale price and must be made within 90 days of change of ownership.

Downsizer contributions don't count towards your concessional or non-concessional contribution caps and 
there's no age limit and no requirement to meet the work test.

"People 55 and over may not have had the super guarantee their entire working life," says planner Marisa Broome. "They're the forgotten generation the government is trying to help. They can't access the age pension until 67 and they don't have enough super to live on. It's trying to help those people be more self-sufficient in retirement."

"If a couple own a $3 million house and decided to downsize, they could contribute $300,000 each, plus $330,000 each under the bring-forward rule.

"If have access to a large sum of money - sold your home, or business, or inherited money - you can bring forward three years' worth of non-concessional contributions provided that you are under 75.

"The downsizer is a very powerful way for anyone with a low super balance to boost it. You don't even have to buy a cheaper home," says Broome.

O'Halloran says anyone considering making a downsizer contribution should seek independent financial advice first as there may be far-reaching implications.

For more information see ato.gov.au/Individuals/Super/In-detail/Growing-your-super/Downsizer-contributions-for-individuals.

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