Super changes add flexibility
Written on the 3 August 2020 by Arrow
Just when you thought you had a grip on the superannuation rules, they change again. This time though, the changes are mostly positive, especially for older super members keen to top up their savings.
From 1 July 2020, changes came into effect with the potential to help retirees as well as members suffering financial hardship due to COVID-19.
Here's a summary of the new rules.
Work test to kick in at 67
Under the work test, which now kicks in at age 67, you must work at least 40 hours within 30 consecutive days in the financial year in which you make the contribution.
It was also proposed to allow people aged 65 and 66 at the start of the financial year to use the existing non-concessional bring forward rules. If eligible, this allows you to 'bring forward' up to three years' worth of non-concessional contributions (up to $300,000) in the current financial year. Legislation must be passed before this proposal becomes effective.
Couples get a super boost
What's more, if your spouse (married or de facto) earns less than $37,000 you may be able to claim a tax offset of up to $540 for your contribution to their super. The offset phases out once your partner's income reaches $40,000.
The usual non-concessional contribution limits still apply, and the receiving spouse still needs to meet the work test where applicable.
Super pension drawdowns halved
This temporary measure will help retirees who might otherwise have to sell assets at depressed prices to provide cash for their pension payments.
For example, someone aged 65 would normally be required to withdraw 5 per cent of their super pension account balance each financial year. But in 2020-21 they need only withdraw 2.5 per cent of their account balance if they wish. There's no maximum withdrawal rate.
Early release of super
It must be stressed though, that the early withdrawal of your super should be a last resort because of the adverse impact on your retirement savings. An amount of $10,000 withdrawn early in your working life could potentially be worth many times that by the time you retire.
If, after weighing up your financial options, you wish to take advantage of this temporary measure then you need to apply by 24 September 2020.
Super guarantee amnesty for employers
You have until 7 September 2020 to disclose and pay any unpaid Super Guarantee (SG) amounts for your employees. These contribution shortfalls can be from any quarter from 1 July 1992 to 31 March 2018.
Under the amnesty, you will not have to pay the administration charge or Part 7 penalty (up to 200 per cent of the Superannuation Guarantee Charge). You can also claim a tax deduction for your payments.
If you would like more information about any of these changes or how to take advantage of them, give us a call.