With a new financial year there come a raft of changes, particularly in the superannuation space.
On 1 July 2021, the super guarantee rate rose from 9.5% to 10%. The ATO understands some pay periods will cross over between June and July when the rate changes. The percentage employers are required to apply is determined based on when the employee is paid, not when the income is earnt. The rate of 10% will need to be applied for all salary and wages that are paid on and after 1 July 2021, even if some or all of the pay period it relates to is before 1 July 2021. That is, the date of salary and wage payment determines the rate of super guarantee payable, regardless of when the work was performed.
For example, if the work was done in June (or partly in June) but employees were paid in July, the rate is 10% and contributions totalling 10% of the employee’s ordinary time earnings for the September 2021 quarter must be made to the employee’s super fund by 28 October. However, if the work was done in July but employees were paid in advance (before 1 July), the rate is 9.5% and contributions totalling 9.5% of the employee’s ordinary time earnings for the June 2021 quarter must be made to the employee’s super fund by 28 July.
The 50 per cent temporary minimum pension has been extended for the 2021–22 year too, which means that the minimum amount that self-funded pensioners have to draw from their superannuation fund is 50% less and is designed to help them take out less because of the significant losses in financial markets as a result of the COVID-19 crisis still having a negative effect on the account balance of their superannuation pension.
Also, the indexation of the transfer balance cap (TBC) to $1.7 million means that we all can have an additional $100,000 in our superannuation funds (wouldn’t that be nice?) that can be transferred to a tax-free ‘retirement phase’ pension account. If we happen to exceed that balance will be liable to pay tax on the excess transfer balance earnings and have to transfer any excess to your accumulation account in the fund or withdraw the amount from the fund as a lump sum.
Perhaps one of the more significant changes for SMSF members is the increase in the maximum number of allowable members in self-managed superannuation funds (SMSFs) and small APRA funds from four to six from 1 July 2021. Previously, Angela and I would not have been able to admit our three daughters to an SMSF but with these changes, we are now in a position to do so, if we want to! This will provide Australians with more flexibility and control in managing their retirement savings and perhaps introduces more family members to your SMSF instead of them (particularly the kids) being given a default fund at the time they start working.
There are some clear advantages to having more members in an SMSF. It provides more money to the SMSF, allowing for the purchase of larger or higher value assets, such as business real property or large parcels of land. It also provides the opportunity for greater diversification of investments. It will also allow the capacity to pool balances, thereby increasing investment choice; increasing engagement with superannuation; and improving estate administration and exit planning.
The new rules will cut red tape by removing the excess concessional contributions charge, which currently applies to contributions in excess of the concessional contributions cap. This will ensure that from 1 July 2022, Australians saving for their retirement are not financially disadvantaged by inadvertent breaches of the cap which is currently $27,500 – up from $25,000 in 2021.
Australians will also be supported to make additional contributions to their superannuation to make up for amounts that they may have withdrawn due to COVID-19. From the 2021-22 financial year, individuals who released superannuation under the COVID-19 early release scheme will have the option of recontributing these amounts as non-concessional contributions, over and above the existing caps.
If you are concerned about the amount of superannuation you currently have, want to know more about SMSF’s or how these changes will personally impact your retirement balances please contact Shannae Hewett on 55612643 to arrange a meeting with our tax and financial planning advisor today.
General advice disclaimer
The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.
Only financial planning advice provided by CeebeksTM Financial Solutions is associated with InterPrac Financial Planning Pty Ltd ASFL 246638.
Christopher Beks (Authorised Representative no. 231937) is a director of CeebeksTM Financial Solutions (Authorised Representative no. 344518) and an Authorised Representative of InterPrac Financial Planning Pty Ltd ASFL 246638 and is authorised to provide personal financial advice.
Chris Beks operates under Beks and Associates Pty Ltd, Corporate Authorised Representative No. 344518.