2021-22 Federal Budget update for SMSF's
2021-22 Federal Budget Update - A strong budget for SMSFs
There were some welcome surprises from the announcement of the 2021-22 Federal Budget yesterday. The key measures impacting superannuation are outlined below:
Superannuation contribution caps will increase from 1 July 2021
Repealing the work test for voluntary contributions
Reducing the eligibility age for downsizer contributions
Relaxing residency requirements for SMSFs
Removing the $450 per month threshold for superannuation guarantee eligibility
All measures outlined (other than the change to superannuation caps) are expected to commence from 1 July 2022, once they have received Royal Assent.
Tax planning for business and individuals
From 1 July 2021, the superannuation concessional and non-concessional contribution caps will be indexed. The new caps for financial year 2021-22 will be:
Concessional cap - $27,500
Non-Concessional cap - $110,000 or $330,000 over 3 years
The total superannuation balance limit that determines if an individual has a non-concessional contributions cap of nil will also increase from $1.6 to $1.7 million, effective from 1 July 2021.
Individuals who are under 65 years old, may be able to make non-concessional contributions of up to three times the annual non-concessional contributions cap ($110,000 from 1 July 2021) in a single year. It is important to note that if an individual enters into a bring forward arrangement before 1 July 2021, they will not have access to any additional cap space as a result of the increase to the non-concessional cap.
Repealing the work test for voluntary contributions
Individuals aged 67 to 74 (inclusive) will be able to make non-concessional (including under the 3 year bring-forward rule) or salary sacrifice contributions without meeting the work test, subject to existing contribution caps and existing total superannuation balance limits.
Reducing the eligibility age for downsizer contributions
The eligibility age to make downsizer contributions into superannuation will be reduced from 65 to 60 years of age. All other eligibility criteria remains unchanged, allowing individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000, per person, from the proceeds of selling their home (provided the home has been owned for 10 or more years). These contributions will continue not to count towards non-concessional contribution caps.
Relaxing residency requirements for SMSFs
SMSFs will have relaxed residency requirements through the extension of the central management and control test safe harbour from two to five years. The active member test will also be removed, allowing members who are temporarily absent to continue to contribute to their SMSF.
Removing the $450 per month threshold for superannuation guarantee eligibility
The Government will remove the current $450 per month minimum income threshold, under which employees do not have to be paid the superannuation guarantee by their employer.
For further information
Further information can be found in the Budget 2021-22 Superannuation fact sheet.
How can we help?
If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2021-22 Federal Budget, please contact Daniel Uden, SMSF Director, our SMSF team or your tax accountant.