Extension of the temporary reduction in Pension minimums
The minimum pension drawdown rates were temporarily reduced in 2019/20 and 2020/21 due to COVID-19 and have been extended for 2021/22. Income Stream members who selected the reduced minimum payment or made no election, will automatically receive this reduced minimum amount.
The reduced minimum drawdown rates are as follows:
|
Age |
Default minimum rates | 2019-20, 2020-21 & 2021-22
Reduced minimum rates |
|
Less than 65 |
4% | 2% |
|
65 to 74 |
5% |
2.5% |
|
75 to 79 |
6% |
3% |
|
80 to 84 |
7% |
3.5% |
|
85 to 89 |
9% |
4.5% |
|
90 to 94 |
11% |
5.5% |
| 95 or more | 14% |
7% |
Super guarantee (SG) rate changes
The most significant change to your retirement savings will see is the increase of the super guarantee (SG). The SG is minimum percentage of your salary that your employer is required to pay into your super fund. The last increase seen to SG was in the 2014-15 financial year when it increased from 9.25% to 9.5%.
Employer SG contributions will increase from 9.5% to 10% on 1 July 2021 and are scheduled to gradually increase to 12% by 1 July 2025.
|
Year |
Super Guarantee |
|
1 July 2014 – 30 June 2021 |
9.5% |
|
1 July 2021 – 30 June 2022 |
10.0% |
|
1 July 2022 – 30 June 2023 |
10.5% |
|
1 July 2023 – 30 June 2024 |
11.0% |
|
1 July 2024 – 30 June 2025 |
11.5% |
| 1 July 2025 – 30 June 2026 |
12.0% |
The 0.5% increase does not mean that everyone gets an automatic pay increase, this will depend on your employment agreement. If your employment agreement states you are paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then your take home pay might be reduced by 0.5%. That is, a greater percentage of your total remuneration will be directed to your superannuation fund.
For those paid a rate plus superannuation, then your take home pay will remain the same, but your superannuation fund will benefit from the increase. If you are used to annual increases, the 0.5% increase might simply be absorbed into your remuneration review.
Employers will need to ensure that they pay the correct SG amount in the new financial year to avoid the superannuation guarantee charge. Where employee salaries are paid at a point other than the first day of the month, ensure the calculations are correct across the month (i.e., for staff paid on the 15th of the month they are paid the correct SG rate for June and July in their pay and not just the June rate).
Superannuation salary packaging arrangements will also need to be reviewed. Employers should ensure that the calculations are correct and the SG rate increase flows through.
Concessional & Non-Concessional Contribution Caps increase
From 1 July 2021, the superannuation contribution caps will increase enabling you to contribute more to your superannuation fund (assuming you have not already reached your transfer balance cap).
|
Cap type |
2020/21 Cap |
2021/22 Cap |
|
Concessional Contributions |
$25,000 |
$27,500 |
|
Non-Concessional Contributions |
$100,000 |
$110,000 |
|
CGT (Lifetime Limit) |
$1,565,000 |
$1,615,000 |
|
Untaxed Plan Cap Amount |
$1,565,000 |
$1,615,000 |
Bring forward non-concessional contribution cap
The bring forward rule enables those under the age of 65 to contribute three years’ worth of non-concessional contributions to your super in one year.
|
Bring forward threshold |
Number of years cap
can be brought forward to current year |
Standard Cap
that applies each year |
Max non concessional cap that applies |
|
Less than $1.48M |
2 years | $110,000 |
$330,000 |
|
Between $1.48M – $1.59M |
1 year | $110,000 |
$220,000 |
|
Between $1.59M – $1.7M |
Nil | $110,000 |
$110,000 |
|
$1.7M or more |
Nil | Nil |
Nil |
Note: Members with total super balance below $1.4 million who triggered the bring-forward rule in 2019/20 or 2020/21 would still have a non-concessional cap of $300,000.
Excess Concessional Contribution (ECC) Charge removed
From 1 July 2021, people exceeding their annual concessional contribution cap ($27,500 in 2021/22), will no longer be liable to pay the ATO’s Excess Concessional Contributions (ECC) Charge. The Treasury Laws Amendment (More Flexible Superannuation) Act 2021 removed the ECC Charge requirement, although anyone exceeding their annual concessional cap will still be issued with a determination and be taxed at their marginal tax rate (less a 15% tax offset) on the excess amount.
Transfer balance cap (TBC)
The transfer balance cap (TBC), as the name suggests, limits how much money you can transfer into a tax-free retirement account. From 1 July 2021, the general TBC will increase from $1.6m to $1.7m but not everyone will benefit from the increase.
|
My Super is |
TBC to 30 June 2021 |
TBC from 1 July 2021 |
|
In accumulation phase |
$1.6M | $1.7M |
| In retirement phase and reached the $1.6M cap limit between 1 July 2017 and 30 June 2021 | $1.6M |
$1.6M |
|
In retirement phase and never reached the $1.6M cap limit at any time between 1 July 2017 and 30 June 2021 |
$1.6M |
$1.6 plus indexation on the amount between your highest ever balance and the $1.6M cap. |
The Australian Taxation Office (ATO) will calculate your personal TBC based on the information lodged with them (this will be available from your myGov account linked to the ATO). If your superannuation is in retirement phase, it will be very important to ensure that your Transfer Balance Account compliance obligations are up to date. For Self-Managed Superannuation Funds (SMSFs), it is essential that you let us know about any changes that impact on your transfer balance account, for example if a member of your fund retires.
Maximum number of members in SMSF increases to six
The Senate passed Treasury Laws Amendment (Self Managed Superannuation Funds) Act 2020, on 17 June 2021 without amendment. Among other things, the Act proposes to amend s 17A(1)(a) of the SIS Act to require an SMSF to have fewer than 7 members (instead of fewer than 5) in order to satisfy the definition of an SMSF.
Besides allowing SMSFs to have up to 6 members, the main change that will occur relates to the signing of a document which will require at least half of the trustees or directors of the trustee company to sign certain fund and regulatory documents. The Act also standardises the wording used in the SIS legislation so that reference to small funds is consistent.
SMSF’s must use SuperStream
From 1 October 2021, SMSFs became part of the SuperStream system. This means if members of the SMSF want to rollover super money into the fund or transfer money out, they are required to use SuperStream. Some SMSFs are exempt from the new requirements.
Recontribution of Covid-19 early release amounts
The Treasury Laws Amendment (More Flexible Superannuation) Act 2021 also includes provisions allowing individuals who received a COVID-19 early release of up to $20,000 from their super amount to re-contribute it without the money counting towards their annual non-concessional contributions cap. The contributions can be made between 1 July 2021 and 30 June 2030, but must not exceed the actual amount accessed early and cannot be claimed as a tax deduction for a voluntary personal super contribution.