Superannuation Changes Explained
With the new financial year rapidly approaching, now is the time to get familiar with the superannuation changes coming into effect from July 1 2022.
Once upon a time, the concept of superannuation was seen as a luxury for public servants and white collar employees of big corporations upon retirement. In 1986, just 32% of private sector employees had access to a super program, and the funds weren’t transferable between different employers as they are now.
Today, superannuation is now a compulsory payment for millions of working Australians, with heavy penalties for employers who fail to meet their obligations. However, it can be difficult for small to medium sized business owners to stay on top of changes to this system, particularly as there is a raft of sweeping reforms coming into effect from July 1 2022.
Seven Superannuation Changes This Financial Year
Although Australia’s globally celebrated superannuation system has seen more than its fair share of overhauls since its inception, this year’s round of updates has been designed to make it easier for everyone to navigate.
Although many of the superannuation changes were originally announced in the May 2021 Federal Budget, it took some time for them to successfully pass through both houses of parliament. For the changes that will come into effect from July 1 2022, Australians from all walks of life should take note of the following updates.
Annual Superannuation Increase - The Superannuation Guarantee will increase by 0.5 percentage points each year until it hits 12% in 2025. The contribution is paid into individual super funds by employers to help employees grow their retirement savings. By law, employers will be required to pay superannuation contributions of 10.5%, up from the current 10%.
$450 Earning Threshold Scrapped - From July 1, workers earning less than $450 a month before tax will be entitled to receive the compulsory Superannuation Guarantee payment from their employers. This is expected to benefit 300,000 low income earners, and should lead to improved retirement outcomes for women, low-income earners and part-time workers.
First Home Super Saver Scheme Expansion - The maximum amount of voluntary contributions made to super that can be released under the First Home Super Saver Scheme, or FHSS, will increase from $30,000 to $50,000. Participants must be first-home buyers and have lived in the home for at least six months within twelve months of purchase.
Boost To Downsizer Incentives - Under the initiative, eligible retirees can use the proceeds from the sale of the family home in Australia to boost their super. The eligibility age for downsizers to top up their super was already set to be reduced to 60 from 65, but as part of the election promises, the age will now be lowered to 55.
Reforms To The Work Test For Tax - From July 1, Australians aged between 67 and 74 will no longer need to meet the work test for salary-sacrifice or personal after-tax contributions. As part of the reforms, the upper age limit will increase to allow people under 75 to make any type of contribution to super without satisfying a work test.
Amendments To The Bring Forward Rule - The bring forward rule means that if contributions are made above the annual non-concessional contributions cap, people may be eligible to automatically gain access to two future year caps. Currently, people have to be under 67 to be eligible, but the age cap is being raised to under 75 from July 2022.Cut To Drawdown Rates Extended - The minimum drawdown requirements determine the minimum amount of a pension that a retiree must draw from their superannuation each year. In the 2022-23 Budget, the 50% reduction on minimum drawdown rates was one of the few superannuation changes, and has now been extended until 30 June 2023.
To protect yourself, your business and your family against the wrath of the Australian Tax Office, partnering with a reputable accountant who is up to speed with the relevant superannuation changes is a must. Thankfully, Muro can help with all of this and more.
Sourcing Help With Managing Your Tax Obligations
Whether you’re starting a business, purchasing an existing one, or even reevaluating where your current enterprise stands - all require some form of financial know-how if you hope to successfully navigate your legal tax requirements as well as hitting your financial and business goals.
However, if understanding the legalities that surround your business or finances isn’t your strong point, then it may be reassuring to know that you’re not alone. In fact, many businesses (big and small) enlist the services of an accountant in order to free up their time while knowing that their financial obligations are already taken care of by the professionals.
Ultimately, the team at Muro believe that every business owner is an entrepreneur. However, accounting does not discriminate - finances break down barriers and are not territorial. If you would like to take a deeper look into your finances, please get in touch with us at Muro today to ensure that you’re on the right path for success.