In what seems to be the ever changing world of superannuation, the Commonwealth Government has recently passed the following reforms:
Increasing the number of members for a Self Managed Superannuation Fund (SMSF) to six from 1 July 2021.
This is useful for a family business that wants the SMSF to own the commercial property out of which the business trades, thereby ‘keeping the wealth within the family’ rather than contributing rent into the wealth accumulation strategy of an external landlord.
Increasing the number of members in a SMSF will allow for the asset pool to increase thereby opening up investment options and strategies available to the fund in order to meet wealth accumulation objectives.
Extending bring forward rules for Non-Concessional Contributions (NCC) to those 65-66 years old from 1 July 2021.
From the 2020/21 financial year, people aged 65-66 were permitted to make a voluntary contribution into superannuation without having to satisfy the work test. This allows for a NCC to be made up to the now increased $110K maximum limit, per annum from 1 July 2021.
At the time of this introduction to allow those aged 65-66 to make a NCC, the ‘bring forward’ of two future years was not permitted, which of course was inconsistent with the spirit of superannuation. However, it was hotly anticipated that the restriction would eventually be removed, which it has now been. Two future years of NCCs can now be brought forward resulting in a maximum of $330K that can be voluntarily contributed into superannuation for those aged 65 and 66.
Extend pension drawdown relief by 50% over the 2021/22 financial year.
For the last two financial years, the minimum pension payment required to be taken by superannuants from their pension accounts was reduced by 50%.
This was a measure introduced to alleviate the pressure on pension accounts being drawn down unnecessarily, resulting in ‘forced’ asset sales to shore up available cash at a time when financial markets were depressed. In essence, the concept was aimed at increasing the ‘longevity’ of pension accounts.
This measure has been extended into the current 2021/22 financial year. This no doubt will be well received by those in pension mode that don’t require the otherwise ‘normal’ minimum withdrawal.
Superannuation guarantee increase to 10% on 1 July 2021.
This refers to the amount employers are required to ‘compulsory’ contribute into superannuation on behalf of an employee. Previously the rate was set at 9.5% of gross salary, it is now 10%.
Another change to be aware of is the increase in contribution caps for the two different types of contributions. As mentioned above, the ‘NCC’ cap has been increased to $110K per annum. Similarly, the ‘concessional’ or taxable contribution cap has been increased by 10% to $27,500 per annum.
There is further scope and incentive for those in accumulation mode to increase the amount that can be contributed into their retirement asset of superannuation. These are positive steps to alleviate gaps in the retirement system, which will make it fairer for everyone.
Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.