The latest Self Managed Superannuation updates
Superannuation contribution caps as of 1 July 2022
From 1 July 2022, the superannuation concessional and non-concessional contribution caps have remained at their current levels, however there are some easing of restrictions on the ability to make non-concessional contributions. The contribution caps for the 2022/2023 financial year are:
Concessional cap - $27,500
Non-Concessional cap - $110,000 or $330,000 over 3 years
The Total Superannuation Balance (TSB) limit that determines if an individual has a non-concessional contributions cap of nil increased from $1.6 to $1.7 million on 1 July 2021. The $1.7m TSB cap remains in place for the FY23 year. The TSB cap and its function is explained further below.
Non-concessional contributions and the work test.
From 1 July 2022, passing the work test will not be required for those eligible to make a non-concessional contribution to super. In addition, the bring forward 3 year non-concessional rule (allowing non-concessional contributions of up to $330,000 in one financial year) has been extended to those up to the age of 75. Note that the work test (40 hours work in a 30 day period) is still required for those over the age of 67 who seek to make a concessional contribution to super. From 1 July 2022 this work test can be satisfied at any time during the financial year, even after a concessional contribution to super is made.
Super guarantee increasing from 10% to 10.5% on 1st July 2022
On 1 July 2022, the super guarantee charge (SGC) will rise from 10% to 10.5%. If you have employees, you will need to ensure your payroll and accounting systems are updated to incorporate the increase to the super rate. Further, from 1 July 2022 the minimum threshold for paying SGC is being removed. This means that all employees, even those that earned less than $450 per month in the past where SGC was not payable, will be eligible to receive superannuation payments from their employers.
The table below is a summary of the changes in the superannuation caps from the 2022 year to the 2023 year:
1. The annual concessional cap and carry forward concessional contributions – what do they mean?
Historically, the annual concessional (before-tax) contribution caps offered little flexibility for those who take time out of work, work part-time, or have ‘lumpy’ income and therefore have periods in which they make no or limited contributions to superannuation.
From 1 July 2019, the Government has allowed individuals with a total superannuation balance of less than $500,000 (just before the beginning of a financial year before a carry forward up contribution is made), to make ‘carry forward’ or ‘catch-up’ superannuation contributions. Individuals will be able to carry forward their unused concessional cap space from the 2019 financial year on a rolling basis for a period of five years. Amounts that have not been used after five years will expire.
Broadly, this means that, if an individual has not maximised their $25,000 concessional cap in the FY19, FY20, FY21 or FY22 years, they can carry the unused amount of their annual contribution cap to the following year. For those that have a superannuation balance of less than $500k on 1 July 2022 and who have not made any concessional contributions (both employer or personal), then their concessional contribution cap for the FY23 year could be as high at $130k.
As the contribution caps are a function of the individuals circumstances and not the superannuation fund, contact your accountant responsible for lodging your personal tax return to determine your modified (if applicable) contribution cap.
2. Non-concessional contributions
You can make after tax contributions to super that could come from your personal savings, transferring personal investments, an inheritance or from the sale of investments. For the 2022 and 2023 financial year the annual personal after tax contribution cap is $110,000. While in the FY22 year you need to be under age 67 to access the 3 year bring forward non-concessional regime, allowing non-concessional contributions of up to $330,000, from 1 July 2022 this regime is available to those up to age 75. This allows you to make substantial contributions to super and build up your retirement savings
Important: Key to the Government’s 2017 changes to superannuation were that, for those individuals with a total superannuation balance (over all their super funds) in excess of $1.7m (was $1.6m but indexed to $1.7m on 1 July 2021) on the proceeding 1 July, non-concessional contributions will generally not be allowable. In addition the 3 year bring forward provisions may be effected if an individual’s superannuation balance is $1.4m or over. The specific workings of non-concessional contributions are technical in this regard and our office should be contacted for comment prior to considering such contributions.
3. Total Superannuation Balance and Transfer Balance Cap.
On 1 July 2021 The Total Superannuation Balance (TSB) and Transfer Balance Caps (TBC) were uplifted by $100,000 to $1,700,000 each.
The increase in the TSB will allow those with less than $1.7m in superannuation (on an individual basis) to contribute additional non-concessional contributions (as measured on the 1st July in the year of making the contribution). Since 1 July 2017 the TSB has been $1,600,000
The increase in the TBC will allow those commencing Account Based Pensions to start these pensions with a value of $1.7m (this has been limited to $1.6m from 1 July 2017). Importantly, for those that have already commenced an account based pension:
If the starting value of the account based pension was $1.6m, no indexation is available.
If the starting value of the account based pension was less than $1.6m, then part indexation is available and the individual will have their own personal TBC.
4. The Work Test
If you are between ages 67 to 75 you will need to meet a work test to contribute a concessional contribution to superannuation. This means, in the financial year you intend to make a contribution, you need to be gainfully employed for at least 40 hours during 30 consecutive days at any time during the financial year the contribution is made. Gainful employment refers to an arrangement where the individual is being paid for services that individual renders and is generally achieved through such means as an employment arrangement, working as a contractor or through a partnership.
Downsizer contributions – what do they mean?
From 1 July 2018 the Coalition introduced ‘downsizing’ provisions where, in the event you sell the family home, some of the proceeds from the home sale (up to a maximum of $600k for a couple) can be contributed to super. The key eligibility criteria for these provisions are as follows:
You (or your spouse) are 65 years old or over at the time you make a downsizer contribution (there is no maximum age limit). From 1 July 2022 the age of 65 has been reduced to 60.
The amount you are contributing is from the proceeds of selling your home where the contract of sale was exchanged on or after 1 July 2018.
Your home was owned by you or your spouse for 10 years or more prior to the sale.
The proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT (acquired before 20 September 1985) asset.
You make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually the date of settlement.
These contributions are bound to be popular particularly when considering.
The size of the ‘new home’ is irrelevant for the purposes of accessing the downsizer contribution.
The downsizer contribution is available irrespective of a members superannuation balance (eg individuals can still access the downsizer contributions if their super balance is in excess of $1.6m)
The property being sold does not need to be your place of residence at the time of sale – merely it must have been your place of residence at some stage during the ownership period.
These contributions will not count towards non-concessional contribution caps.
Please contact our office if you have further questions with regard to the downsizer contributions.