The new financial year is fast approaching and with this comes various legislative changes enacted from the previous Government.
There have also been a number of changes proposed by the new Government, which may take effect in the coming months. Here’s what you need to know.
Below is a brief summary of some of the key changes that have been legislated and will take effect for the 2022/23 financial year.
Superannuation contribution age
Currently, anyone over the age of 67 needs to meet a work test to make personal contributions to a superannuation fund. This involves working 40 hours in a 30-day period. From 1 July 2022, those aged 67 to 75 will no longer need to meet a work test to make these contributions.
This will provide an opportunity for people to further increase their superannuation savings or consider other superannuation strategies.
It’s important to note that anyone wanting to claim a tax deduction for their contributions still needs to meet the work test.
Currently, someone can contribute up to $110,000 per financial year to superannuation as an after-tax contribution. People under the age of 67 can currently use the bring-forward rule to utilise up to 3 years of contributions caps and contribute up to $330,000. From 1 July 2022, those between 67 and 75 will also be eligible to use the bring forward rule, allowing potentially larger contributions to a superannuation fund.
Superannuation downsizer contributions
Downsizer contributions allow eligible individuals to contribute some or all of the proceeds from the sale of their home to superannuation, without impacting other contribution caps. Provided certain conditions are met, it may be possible to contribute up to $300,000 per person. The eligibility age for this type of contribution will reduce from 65 to 60 from 1 July 2022.
The superannuation guarantee (SG) rate will increase to 10.5% from current 10% from 1 July 2022. This means most employees will receive additional super contributions from their employer.
Current SG threshold abolished
Currently, anyone earning less than $450 per month is not eligible for SG contributions. This threshold will be abolished from 1 July 2022 meaning low-income earners will now receive super contributions from their employer, regardless of their income level.
Temporary reduction to minimum pension rates extended
The temporary reduction to minimum pension payments by 50% has been extended for the 2022/23 financial year. This applies to account-based, market-linked and transition-to- retirement pensions and allows those with these investments to draw less income if it’s not required.
Proposed changes to Legislation
Below is a brief summary of some of the key changes that have been proposed for the 2022/23 financial year that will need to be passed into legislation to take effect.
Superannuation downsizer contributions
Whilst the previous Government had legislated to reduce the eligibility age for this type of contribution from 65 to 60 from 1 July 2022, the new Government has proposed to further reduce the eligibility to age 55.
Freezing of deeming rates for Social Security
Many social security payments use deeming as a measure to determine how much income is derived from certain investments. This figure is used towards the income test, which is used to help determine eligibility for a Social Security payment. The current Government has proposed to freeze deeming rates until 2024 even though interest rates are expected to climb. This may benefit anyone receiving an income tested pension or allowance.
Increasing eligibility for the Commonwealth Seniors Healthcare Card
The Commonwealth Seniors Healthcare card (CSHCC) provides a number of benefits to cardholders such as cheaper medication and bulk billing. It is generally issued to those who don’t qualify for an age pension but is income tested. The new Government has proposed to increase income thresholds significantly, which may open the door for those to access this benefit who may not have previously qualified.
Help to Buy scheme
The new Government has proposed to introduce the Help to Buy scheme which will be available for up to 10,000 people each year. The scheme will provide equity support to homebuyers for up to 40% of the purchase price of a new home and up to 30% for an existing home. Homebuyers would be required to have at least a 2% deposit and meet other conditions.
How We Can Help
If we can assist you to advice around any of these issues to help you plan effectively for next financial year, please get in touch with our team below or call (02) 4969 6600.