On 1 July 2022, two key changes to the Australian superannuation landscape occurred which could be game-changers for those looking to make additional superannuation contributions and boost their retirement savings in a concessionally-taxed vehicle.
…with some good news for those aged 67 and above…
Firstly, those aged 67 and above can now make non-concessional superannuation contributions up to age 75 without the need to meet a work test. Bringing-forward two financial years of non-concessional contributions to make a $330,000 total contribution in a single financial year has also been extended to benefit those up to age 75.
Prior to 1 July 2022, these strategic elements were only available up to age 67. An additional eight years to contribute to superannuation may make a world of difference to financial wellbeing in later years.
Importantly, the work test is still required for those making concessional contributions, where a tax deduction is being sought.
…and also those 60+ considering a move…
Secondly, further flexibility has occurred by enabling those 60 or older (previously was age 65) to make a ‘downsizer’ contribution. These can be made where an individual sells their home – which must have been their main residence at some point – up to a cap of $300,000 (or $600,000 per couple). The strategic value of this type of contribution is that it doesn’t count towards the annual contributions caps, nor is there any work test or upper age cap applied.
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And – contrary to its actual name – there is no requirement for the next home purchased to be smaller in any way. ‘Downsizer’ contributions are great news for individuals who move home later in life and still want to consider the possibility of topping-up their superannuation with any surplus funds.
…that may soon also be relevant for those 55+
Legislation has recently been introduced into Federal Parliament reducing eligibility for a ‘downsizer’ contribution to those 55 or older. At the time of writing, this change in age-based criteria has not yet become law.
Carefully tailored financial advice is still important to navigate the maze
Despite the changes mentioned above, the broader superannuation contribution rules remain unchanged. These can be tricky to traverse, and some traps do exist, particularly when it comes to contributions caps and structuring the order of contributions to maximise contributions ability. There are also complicated requirements that must be met to claim a concessional contribution as a tax deduction.
Changes set to continue
Draft legislation has been introduced into Federal Parliament for a significant uplift to the Commonwealth Seniors Health Card (CSHC) income test thresholds to further support self-funded retirees at a time when cost of living concerns are front of mind for many.
At the time of writing, this legislation has not become law. Should it do so, on 20 September 2022 the thresholds will become:
$90,000 for a single person (currently $57,761)
$144,000 for couples (currently $92,416), and
$180,000 (currently $115,522) for couples separated due to illness, respite care or prison.
There is no assets test requirement to receive the CSHC.
Important note: as the CSHC income test is highly specific in nature, it’s not always easy to self- assess eligibility. There may also be some strategic areas to explore with your existing retirement planning strategy, to assess if these proposed changes may be of benefit to you.
Benefits of the CSHC
There’s quite a lot! There’s reduced prescription costs for medication listed under the Pharmaceutical Benefits Scheme, the possibility of bulk-bill GP visits and a lowered Medicare safety net threshold. Additional benefits such as reduced rates, utility bills and public transport costs may also exist depending on where you live.
Refining your financial planning strategy to consider these new superannuation rules or even having the ability to now access the CSHC – it may be just what the doctor ordered.
Originally published by Catherine Chivers, Senior Manager – Strategic Advice, Perpetual Private