Seven ways it's going to be easier to pump up your super after July 1
Positive changes to superannuation - particularly a higher employer contribution - will help pump up your nest egg from July 1.
Also limits to superannuation, after remaining the same for several years, will all go up from July 1. This means if your retirement savings need a boost, you can gain generous tax concessions on bigger contributions.
Here are seven superannuation changes coming into effect next Thursday.
1. 10% SG contributions
The long-awaited rise in the superannuation guarantee - put on ice for six years - finally kicks in on July 1. All employees will receive 10% of their salary paid as superannuation, up from 9.5%.
The biggest winners will be employees on award wages or enterprise agreements negotiated by a union because the superannuation will be paid on top of their way. Not so fortunate are employees on contracts or individually negotiated arrangements who receive superannuation as part of their salary package.
The additional 0.5% will be taken from their salary.
2. Higher contributions
There have been strict limits on superannuation contributions that are concessionally taxed since 2017 and penalties when you go over the amount.
The good news is that you can get a tax concession on amounts up to $27,500 from July 1, up from $25,000.
3. One-off contributions
If you are approaching retirement or have a capital gains windfall, you should consider making a one-off deductible superannuation contribution to reduce the tax payable while boosting your retirement savings at the same time.
This is useful for anyone who takes time out of the workforce such as maternity leave or elder care. You can add more to your superannuation fund from July 1 if you are under 65 years old, by making non-concessional contributions of up to three times the annual non-concessional contributions cap. This rises to $110,000 from $100,000 from July 1, in a single year.
4. Higher bring forward contributions
Another way to pump up your super is to take advantage of the bring forward rule. It allows you to contribute three years' worth of non-concessional contributions to your super in one year. From July 1, you will be able to contribute up to $330,000 in one yea, up from $300,000.
It's also worth noting that anyone who triggered their bring-forward period in either the 2019-20 financial year or the 2020-21 financial year can't take advantage of the higher non-concessional cap until their current bring-forward period expires.
|Contribution cap||Current||From July 1, 2021|
* Must be under age 65 at some time during the year the contribution was made. The total superannuation balance is less than $1.48m at June 30, 2021.
5. Total balance limit
For anyone with big dollars in their superannuation fund and on the verge of retirement, they could benefit from a rise in the transfer balance cap. This is the lifetime limit on the total amount of superannuation that can be transferred into retirement phase income streams, including most pensions and annuities.
It is increasing from $1.6 million to $1.7 million on July 1. This means you will receive generous tax advantages on more money.
6. SMSFs can have six members
Self-managed superannuation funds (SMSFs) will be able to have six members in the fund, up from four, from July 1.
Andrew Yee, who heads the SMSF team at HLB Mann Judd in Sydney, says that while there are cases where this will work for SMSFs, unless there is a very good reason, it is best not to add more members to your SMSF.
Lee says that if it is a mum and dad SMSF, their investment strategies and retirement horizons will be very different from their kids. However, parents who add their kids to their SMSF can help take care of their kids' superannuation. Yee says parents tend to be very focused whereas kids don't pay much attention to superannuation and this can be beneficial.
7. Stapling to your super fund
Soon Australians will have their existing super account 'stapled' to them as they change jobs. It's designed to stop the creation of multiple accounts that reduce employee's retirement savings.
The stapling of funds is part of the Your Future, Your Super changes that passed through Parliament last week. It was set to be up and running on July 1, but the start date has been pushed back to November 1.
If you don't fill out a choice of fund form when you start a new job, employers won't put you into its default fund. Instead it will contact the ATO and find your stapled super account and pay the super into that account.
Part of the Your Future, Your Super changes is to notify members if they are in an underperforming superannuation fund. It is relying on information compiled by APRA that analyses not only the performance of funds but asset allocation, fees and much more. This comparative information in an interactive YourSuper comparison tool that is designed to make it easier for fund members to choose a better fund. It is due to commence from July 1.
More changes in 2022
There are many superannuation changes scheduled to come into effect in 2022. One is the much-anticipated removal of the $450 per month threshold for superannuation guarantee eligibility.
Get stories like this in our newsletters.