I’ve just finished my contract (located in another state) and just about to start another one (now back in Sydney). I haven’t had time to summarize the changes introduced the budget to date, but I am now able to do so.
Here are the major changes:
Removal of $450 income threshold for Super Contributions
Employers are required to pay superannuation to employees who are over 18 when their earnings are greater than $450/month. The budget scraps the $450 limit. Employers are now required to contribute for all levels of income. The proposed start date is July 2022.
Works Test abolished for those between 67 and 74
At the moment, you cannot contribute to Super (concessional or non-concessional) if you are over 67 and cannot pass the works test (i.e. “you have been gainfully employed during the financial year for at least 40 hours over a period of no more than 30 consecutive days”). In 2020, the maximum age was changed from 65 to 67 and in 2019 it was changed from 65 to 66 provided you had less than $300K in super (!).
This budget provision changes the maximum age and you can now contribute up to the age of 74 without having to pass the works test (excluding personal deductible contributions i.e. those made from after tax income and claimed as a deduction). A similar provision was introduced in the 2016 federal budget, however this was scrapped later in the year when the maximum super amounts were revised. This provision should be quite handy for retirees wishing to contribute any surplus funds when expenditure is less than minimum super withdrawal amounts or contributing any asset sales.
Pensions Loans Scheme
The pensions loans scheme was changed significantly in the 2018 budget. These changes made it a lot more attractive to retirees and doubtlessly more popular. The changes in this budget make it even more attractive by enabling lump sum payments (up to 26 fortnight’s worth of advance payments in any 12 month period in up to two lump sums) and also introducing a no negative equity guarantee (i.e. if you live long enough so that you have no equity remaining, you don’t go into debt). The present interest rate is 4.5%, This provision is proposed to commence on 1 July 2022.
Age Threshold for contributions from PPOR sale
In the 2016 federal budget it was announced that it would be possible for each member of a couple (or a single person) to contribute up to $300K of the proceeds of their PPOR to super (as non-concessional contributions). In order to be eligible, you had to be over 65. This age has now been reduced to 60. This provision is proposed to commence on 1 July 2022.
New Thresholds
Although not part of the budget, thresholds will increase on 1 July 2021 in line with indexing provisions as per the below
- Concessional contribution cap to go from $25K to $27.5K
- Non concessional cap to go from $100K to $110K
- General transfer cap to go from $1.6M to $1.7M
- The Total Super Balance Cap increases from $1.6M to $1.7M
Summary
The 2021 budget changes relating to early retirees have been small, but all positive. For us, the change in the works test, and the pension loans scheme may be of benefit.
Retiring early for Australians 