POSTED: 08 Jan, 2022
Superannuation changes recap – 2021
Summary of Changes to Superannuation in 2021
Superannuation contribution caps and thresholds indexed
The superannuation contribution caps thresholds have increased due to indexation.
Effective 1 July 2021, these thresholds are as follows:
- The concessional contributions (pre-tax) cap increase to $27,500
- The Non Concessional Contributions (after tax) cap increase to $110,000, or $220,000 and $330,000 under the two and three year bring forward rule, respectively
- The general transfer balance cap increase from $1,600,000 to $1,700,000
COVID-19 relief measures for SMSFs extended
SMSFs impacted by COVID-19 due to the extended lockdowns in certain states and territories will be granted extended relief to cover the 2021/22 financial year.
During COVID, a SMSF trustee may have provided or accepted certain types of relief, such as giving a tenant/s (including a related party tenant) a reduction in rent if they were financially impacted due to COVID-19. As charging a price that is less than market value will usually give rise to contraventions under the superannuation laws, the relief measures will avoid this outcome if the arrangement meets certain criteria (ie, the relief is offered on commercial terms and the arrangement is documented, etc).
Bring forward rule extended to 67
From 1 July 2020, individuals can trigger a bring-forward period if they are under age 67 (previously age 65) at the start of the financial year.
This means the work test (or work test exemption) only needs to be satisfied if the contribution is made after the individual turns 67.
If the individual can satisfy the work test (or the work test exemption), they will have the entire financial year to make any bring-forward non-concessional contributions (NCC) to superannuation.
Minimum annual pension drawdowns halved
The 50% reduction in pension minimums have been extended to 2021/22 due to COVID-19.
This reduction applies to minimum annual pension payments required from account-based pensions, transition to retirement income streams and market-linked pensions (term-allocated pensions).
Removal of the excess Concessional contributions charge
Individuals who make Concessional contributions (pre-tax) on or after 1 July 2021 that exceed their Concessional contributions cap will no longer be liable to pay the excess Concessional contributions charge. However, individuals who had exceeded their Concessional contributions cap in the 2020/21 financial year and earlier years (back to and including 2013/14) may still be subject to an excess Concessional contributions charge.
This means from 1 July 2021 onwards, individuals who exceed the Concessional contributions cap will still be issued with a determination and taxed at their marginal tax rate on any excess CC amounts, with a 15% tax offset to account for the contributions tax already paid by their superannuation fund, however no excess Concessional contributions charge will be imposed.
Recontribution of COVID-19 early release amounts
Individuals can now re-contribute amounts they withdrew under the ‘COVID-19 early release of superannuation program’ in 2019/20 and/or 2020/21 without them counting towards their Non-Concessional contributions cap. The re-contribution must be made on or after 1 July 2021, and on or before 30 June 2030.
SMSF member limit increases to six
The SMSF member limit has increased to six, up from previously only allowing only four members.
Although the law allows SMSFs to have up to six members, the Trustee Acts of some states and territories (NSW,VIC,ACT,WA and QLD) still only allow a maximum of four individual trustees for SMSF and small APRA funds (SAFs). Those impacted that want to take advantage of the increased membership will need to have a corporate trustee (rather than individual trustees) in order to satisfy the trustee limit contained in state or territory legislation.
SuperStream extended to SMSF rollovers
From 1 October 2021, SMSF trustees must use SuperStream to rollover any superannuation to or from their SMSF.
SMSF’s have been finding it difficult to obtain a electronic service address (ESA) with a service provider that can action rollovers and listed on the ATO register of SMSF messaging providers.
There are currently five ESA providers according to the ATO, and more ESA’s to be certified in the coming months (Australia Post- likely Feb 2022).
Since there are limited options to choose an ESA for the purpose of a rollover or transfer of an amount, this has caused issued for trustees to satisfy the three day requirement, which could cause SMSF breaches under the Superstream provisions if the rollover doesn’t occur within the three day period.
The industry is working with the ATO to identify a temporary solution which is more viable for SMSFs and trustees to remain compliant.
Single ‘stapled’ super fund rules for new employees
The ‘single default fund’ or ‘stapled super fund’ rules for employees who start new job on or after 1 November 2021 will have employer superannuation contributions directed to their existing ‘stapled fund’, unless they choose another fund.
This will help to protect their retirement savings balances being reduced by the costs of unintended multiple accounts, which are created when a worker changes jobs and does not nominate a superannuation fund.