Many changes have been proposed for retirement in 2022. Thanks to the constant changes in the super rules, it’s all too easy to miss an opportunity you didn’t know existed.
What we know as of February 2022. – Great news for retirees
The major changes to pension insurance proposed in the 2021 federal budget are now enshrined in law. These changes will affect retirees and many people approaching retirement.
Changes include:
- The abolition of the obligation to test work for non-subsidized supercontributions for 67-75 year-olds
- Extension of the right to minors under 75 to make unsubsidized contributions using the “bing forward” rules
- The ability to make super downsizer contributions has been extended to people aged 60 and over.
Work Test Requirement
The work test is no longer mandatory for people aged 67 to 75 if they make wage sacrifice contributions and non-concessional personal contributions to the super. However, the test must still be passed in order to qualify for a reduced personal contribution tax deduction.
With the exception of the deduction contribution, no undiscounted contributions can be made once the total superannuation balance (TSB) reaches $1.7 million.
Concessional Contributions
The subsidized contributions can be paid independently of the TSB. There is a contribution limit of $ 27,500 per year. This includes super from all sources, including the mandatory employer contribution.
If you haven’t used your full $ 25,000 maximum in subsidized contributions in 2018-19, 2019-20, or 2020-21, any unused maximum amount can be paid this fiscal year, giving you more tax deductions and savings.
For example, if your subsidized contributions were $ 18,000, $ 20,000, and $ 22,000 in each of the last three fiscal years, you have an additional $ 15,000 ($ 7,000 + $ 5,000 + $ 3,000) to play with this financial year and you ( or your employer) you can contribute up to $ 42,500 as long as your TSB was less than $ 500,000 on June 30, 2021.
What happens if you didn’t use all your uncapped amounts before June 2022.
If you haven’t used any unused caps before June 30, 2022, all is not lost as you can roll them forward continuously for five years. In the example above, $7,000 can be carried over to 2023-24, $5,000 to 2024-25, and $3,000 to 2025-26 provided that in the year you wish to apply them, your TSB at previous June 30 is less than $500,000 – and courses you can contribute to
Changes to ‘Bring Forward’ Rules
There is no phasing out of the anticipation rule for people approaching the age of 75. This means that if a person is under the age of 75 before July 1 and meets the eligibility criteria, including those related to the TSB, the forward rule can be activated. It could allow a person to invest up to $ 330,000 in their super, as long as the prepayment rule hasn’t been used in the past three years.
Contributions must be received no later than 28 days from the month in which the person turned 75. However, if a person turns 75 in June, he cannot activate the bring forward rule until July of the following fiscal year. The possibility of withdrawing money from the super and then re-contributing it as a non-subsidized contribution can be a valid tool to lower the death tax – paid on death benefits received by non self-sufficient adult children – because it is part of the taxable part of a super. fund to the tax free part.
Super contributions between partners
If there is a substantial imbalance in a couple’s super accounts, a partner can also withdraw, say, $ 330,000 and contribute to their partner’s super, if the partner’s super does not exceed $ 1.7 million.
Downsizing Super Contributions
To make a write-down contribution following the sale of a home (which you or your spouse have owned for at least 10 years), you must be at least 65 years of age at the time of the contribution. This allows you to upgrade your super even if you are otherwise not eligible to contribute due to age, employment status or TSB. From 1 July the minimum age will be lowered to 60 years.
The ability to contribute to weight loss by age 60 has significant benefits:
- It could allow those with super high balances to put another $ 300,000 each in super because the $ 1.7 million limits on unsubsidized contributions don’t apply to downsizer contributions.
- It can also help people maximize the amount they can have on the super sale of their home.
Example
A couple can contribute a total of $ 630,000 from the proceeds from the sale of a home. The first contribution would be $ 330,000, using the bring-forward rule, and the second the downsizer contribution of $ 300,000. This is where the importance of professional financial advice is paramount as a property’s terms of sale may need to be adapted to maximize super contributions.
Impacts on Capital Gains Tax
In some cases, tax-deductible super-contributions can be used to reduce capital gains tax (CGT). This is relevant if a person has less than $ 500,000 in super at the end of the previous fiscal year and has not made subsidized contributions because they have been unemployed for several years. It is possible that up to $ 100,000 can be donated to the super using the recovery grant strategy. This would eliminate the CGT when selling an asset.
Super Assessment & Centrelink
Since pension fund funds are not assessed by Centrelink until the holder reaches retirement age – or begins a stream of income from their super fund – the ability to invest large sums money in the super fund can be very effective, especially when there is an age difference between the members of a couple. An older partner may qualify for a semi-retirement pension by using the super in the name of the younger one.
Spouse contributions
The age limit for spouse contributions is now 74, but the receiving spouse must meet the job test or job test exemption of 67. A spouse contribution may give you the option to apply for a credit. tax up to $ 540. Raising your spouse’s super and getting a tax break at the same time is a win-win situation.
$450 monthly income threshold for mandatory employer contributions removed
The current monthly income threshold of $450 prevents approximately 300,000 low-wage workers, 63% of whom are women, from receiving mandatory employer contributions (guaranteed pension contributions). The budget measures seek to remove this threshold and ensure that this group of workers is overpaid. If you’re still working, even if only for limited hours, that could mean more retirement savings.
Please contact our office for more information.