What Are the New Rules for Superannuation?

If you could change one thing about superannuation, what would it be?

A higher super guarantee rate? Getting super guarantee regardless of income? An easier way to compare super funds? Make voluntary superannuation contributions easier?

You might have just gotten your wish.

Australia has recently implemented several changes to its superannuation system to make it easier for people to manage their retirement savings and for employers to comply with their obligations.

The new rules for superannuation provide greater flexibility and security for retirement savings in Australia.

One of the key changes for Australians is the ability to compare and choose super fund products more efficiently. Additionally, you can contribute the proceeds from selling your primary residence into one’s super fund at an earlier age.

The mandatory super guarantee rate increased while employees aged 18 and up are entitled to receive super guarantee contributions from their employer, regardless of their income.

The First Home Super Saver Scheme has also been expanded, with increased contribution and withdrawal limits, and it’s now easier for older Australians to make voluntary contributions to their super.

Additional changes also make it easier for employers to submit employee data to government agencies, creating a more efficient process.

For Members

Rule changes to superannuation involve lower eligibility age for downsizer contributions, increased super guarantee, a better First Home Super Saver scheme, and more lenient voluntary contributions for the elderly.

Changes to superannuation cover more than rules; it also involves a system upgrade. Your Super Comparison Tool has more features that allow investors to compare superannuation funds more effortlessly.

Your Super Comparison Tool Update

On 31 August 2022, the ATO updated the YourSuper Comparison Tool with the most recent rankings for 69 MySuper funds allowing Australians to compare their super fund against other default products on an apples-to-apples basis.

The updated YourSuper comparison tool does the following:

Displays the MySuper products ranked according to fees and net returns (updated quarterly)
Enables you to choose and compare up to four MySuper goods in greater detail at once.
Links to a super fund’s website upon selecting a MySuper product from the table
Display your existing super accounts along with other MySuper products if you view the personalised version through myGov
Provide links to assist you in consolidating your super accounts.

The information displayed in the comparison tool is compiled and provided by the Australian Prudential Regulation Authority (APRA).

APRA has evaluated each MySuper product’s annual performance. For each fund, the investment performance column yields one of the following outcomes: performing, underperforming, or not assessed.

To protect investors, a MySuper product rated as underperforming for two consecutive years ceases to accept new members until it is rated as ‘performing’ by APRA.

While employers using any of the 2-year underperforming My Super products as their default fund need to find a different default fund for their new employees.

However, you can still view these products on the YourSuper comparison tool even though can’t join as a new member.

Age Threshold for Downsizers Lowered

The Treasury Laws Amendment (2022 Measures No. 2) Act 2022, which lowered the eligibility age for downsizing to 55 years and over, became law on 12 December 2022.

The new amendment comes after the Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Act 2022, which took effect on 1 July 2022, reduced the eligibility age from 65 years and over to 60 years and over.

The new amendment means starting on 1 January 2023, eligible individuals age 55 or older can opt to make a downsizer contribution into their superannuation of up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home.

Provided that the home is located in Australia, has been owned by either spouse for at least ten years, and the sale must be exempt or partially exempt from capital gains tax (CGT).

A downsizer contribution is not subject to any contribution caps and does not affect your total superannuation balance until it is recalculated at the end of the financial year.

On the other hand, downsizer contributions will count towards your transfer balance cap. This cap is in effect when you transition your super savings into the retirement phase and is taken into account for determining age pension eligibility.

Super Guarantee Increase

Employer contributions to the superannuation guarantee rate increased to 10.5% as of 1 July 2022. A 0.5% increase from the previous financial year. The super guarantee rate will rise an additional 0.5% a year until it reaches 12% in 2025/26.

This means the super guarantee rate of 10.5% is only for 1 July 2022 – 30 June 2023. It will increase to 11% from 1 July 2023 to 30 June 2024.

The superannuation guarantee (SG) specifies the minimum percentage of your gross salary and wages that your employer must contribute to your super fund. The super guarantee is based on an employee’s ordinary time earnings (OTE), and overtime and expenses are not included, although some bonuses and allowances may be included.

Super guarantee due dates occur quarterly, and employers must make super payments before these due dates to avoid paying the super guarantee charge (SGC).

From the table above, you’ll see that your employer will be paying 10.5% of your OTE into your super account until 30 June 2023 and 11% from 1 July 2023.

Expansion of the First Home Super Saver Scheme

Starting on 1 July 2022, the First Home Super Saver (FHSS) Scheme’s maximum withdrawal will rise from $30,000 to $50,000.

Due to the favourable tax status of superannuation, the FHSS enables first-time homebuyers to save money for a first house inside their super fund.

You can take advantage of the First Home Super Saver (FHSS) Scheme if you’re at least 18 years old, buying or building your first home in Australia, and planning to live in it.

You can make voluntary concessional contributions under the FHSS scheme as a first-time home buyer. This includes salary sacrifice payments or contributions for which you have claimed a tax deduction or intend to claim one; these are typically taxed at 15%.

You can also make voluntary non-concessional contributions including personal after-tax contributions where a tax deduction has not been claimed.

For requests for FHSS determinations made before 1 July 2022, the $30,000 limit on acceptable contributions is in effect.

Only requests for FHSS determinations made as of 1 July 2022 will be subject to the $50,000 cap on eligible contributions.

Abolishing the Work Test for Older Australians

Previously, if you were 67 to 74 years old, you were only permitted to make or receive voluntary contributions (both concessional and non-concessional) to your super if you met the work test. You must work at least 40 hours within the applicable financial year over 30 days. This requirement was removed as of 1 July 2022.

However, individuals between the ages of 67 and 74 must still satisfy the work test or qualify for a work test exemption to claim a deduction on any personal deductible contributions. Individuals over 75 are typically not eligible to receive voluntary super contributions.

For Employers

Workers aged 18 and up are now entitled to a super guarantee no matter how much they earn. Employers need not worry about the additional paperwork as ATP makes reporting easier with an expanded single-touch payroll.

ATO Announces Intention to Expand Use of STP data

The Single Touch Payroll (STP) programme is an Australian Taxation Office (ATO) initiative to reduce employers’ reporting requirements to government agencies.

Employers who use STP submit their employees’ payroll data to ATO each time they pay salaries and wages using STP-compatible software.

Payroll data covers superannuation, pay-as-you-go (PAYG) withholding, salaries and wages.

The ATO would increase the amount of data gathered through STP, according to the 2019–20 Budget announcement.

Employers who must submit employee data to numerous government agencies will now have less work to do thanks to the STP expansion (aka STP Phase 2). Additionally, it aids in the timely delivery of the correct payment to Services Australia’s clients.

Mandatory STP Phase 2 reporting began on 1 January 2022.

ATO’s approach to STP Phase 2 is flexible, reasonable, and straightforward for employers based on business readiness and individual circumstances.

Digital service providers (DSPs) can request a delay for their clients if they require extra time to make the necessary adjustments and update their solutions to support STP 2.

Removal of the $450 Monthly Threshold

The Australian government declared its plan to eliminate the $450 monthly income threshold for Superannuation Guarantee (SG) contributions in the 2021 Federal Budget.

The threshold determined that workers could only receive SG contributions if they were over 18 and earned $450 or more from an employer each calendar month before income tax deduction.

Employees under 18 must work more than 30 hours per week and make $450 or more (before taxes) each calendar month to be eligible for SG contributions.

According to the Treasury’s 2020 Retirement Income Review Final Report, this exclusion from SG contributions affects about 300,000 persons or 3% of the workforce. Nearly two-thirds of them were women, and they were mostly young, low-income, part-time employees.

The $450 monthly eligibility requirement for super guarantee (SG) benefits was eliminated as of 1 July 2022. This means that regardless of their pre-tax income if an employee satisfies the other SG eligibility standards, an employer must pay their SG.

However, workers under 18 must still work more than 30 hours per week to qualify.

Navigate the New Rules for Superannuation with NFPG

The recent changes to the Australian superannuation system aim to provide individuals with greater flexibility, security, and control over their financial future. However, with so many changes, it can be difficult for individuals to keep up with the latest developments and understand how they might be affected.

That’s why individuals need to get in touch with an experienced financial adviser to stay informed and make the most of these changes. A financial adviser can help you understand the new rules, and how they might impact your superannuation nest egg, and provide personalised advice and strategies to help you achieve your financial goals.

If you want to stay ahead of the curve and make the most of the new superannuation rules, Newcastle Financial Planning Group can help you! Call us or book online to secure your first appointment today and learn how we can work together to achieve your financial freedom!

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