Several changes to Australia’s superannuation legislation will come into effect on July 1 2022.
What are they, and what do employers need to be aware of?
The Federal Government recently passed legislation to effect key superannuation changes proposed in the 2021 Federal Budget.
The 2021 Federal Budget outlined the Government’s economic forecasts and a range of initiatives to fast-track Australia’s economic recovery following the Covid-19.
In the superannuation space, the focus has been on delivering more for members, particularly women and part-time and casual employees.
The most significant change is an increase to the superannuation guarantee, which will increase by 0.5 per cent—taking the guaranteed amount to 10.5 per cent of income received.
However, there are a few other changes employers should be aware of.
What are the other changes?
Other key changes that are important for employers include:
- Removal of $450 monthly income threshold for super contributions
- Removal of super contribution “work test” for those aged between 67 and 74
Removal of threshold
At the moment, workers aged 18 and over need to earn more than $449 in a calendar month to be eligible for an employer contribution. But that’s about to change.
From July 1, the Government will remove the $450 minimum monthly income threshold on super contributions. This means all workers, whether they earn $1 or $10,000, will be entitled to receive employer super contributions.
Currently, the $450 monthly threshold prevents an estimated 300,000 workers, 63 per cent of whom are female, from receiving employer super contributions.
These changes are essential news for businesses that employ a largely casual workforce.
Getting rid of the “work test” for 67 and 74-year-olds
At the moment, if you’re aged between 67 to 74 and want to continue contributing to your superannuation, you must satisfy what is called the “work test”.
The current work test requires a person to be employed for at least 40 hours in a consecutive 30-day period, during the financial year, before any super contributions can be accepted – both Concessional (before-tax) and Non-Concessional (after-tax).
Under the legislative changes, the work test will be scrapped for those aged between 67 and 74 from July 1 2022. However, the test will continue to apply where an application to make personal deductible contributions is made.
As well as the measures announced in the 2021 Federal Budget, it’s worth noting that the thresholds for a number of existing super measures increased on July 1 2021.
This includes increases in the amounts that workers can voluntarily contribute to super through salary sacrifice or after-tax contribution.
Key super rates and thresholds for 2021-22:
- Concessional contributions cap to increase from $25,000 to $27,500
- Non-concessional contributions cap to increase from $100,000 to $110,000
- General transfer balance cap to increase from $1.6 million to $1.7 million