BDO’s Superannuation National Leader, Paul Rafton, said announcements in this year’s Federal Budget included a number of positive changes for Australians at all stages of life.

Enticing downsizers

Downsizing – moving from a larger home to something smaller – is a trend that’s not going anywhere.

According to Mr Rafton, the Federal Government is doing its bit to keep the momentum going and help people build their super at the same time.

“From 1 July 2022, Australians aged older than 60 years of age who have owned their own home for at least ten years can sell their primary residence and make a one off contribution into superannuation of up to $300,000 per individual,” he said.

“The Government’s proposal is to drop the age for eligibility from 65 to 60 in order to free up stock and create movement in the property market.”

All other eligibility criteria for the downsizer contribution remain unchanged.

Exiting legacy pensions set to get easier

Under new budget measures, individuals locked into old-fashioned legacy pensions, including Market Linked Pensions, will be able to exit them within a two year window from the first financial year after the date of Royal Assent.

“This is a really good measure because some of those legacy pensions were really trapping people in and limiting their opportunities in retirement,” Mr Rafton said.

Has the work test really been abolished?

Currently, individuals aged between 67 and 74 years are restricted from making certain contributions to superannuation unless they are working at least 40 hours in a 30 day consecutive period. This is known as the work test.

From 1 July 2022 Australians will no longer need to meet the work test to be eligible to make non-concessional superannuation contributions and receive salary sacrifice contributions.

But, according to Mr Rafton, there is a catch.

“Abolition of the work test doesn’t extend to contributions made by individuals aged 67 to 74 years from their personal resources, known as personal deductible contributions” he said.

“We support the removal of the work test but question whether the age limit of 74 is relevant in the current environment where individuals are restricted in the amount they can contribute to superannuation based on their total superannuation balance.”

Self-Managed Super Funds (SMSFs) and residency

“SMSF members who are absent from Australia for extended periods of time have long been disadvantaged from a tax perspective,” Mr Rafton said.

“We welcome the relaxation of residency requirements for SMSFs, enabling SMSF members to have similar outcomes to members of large superannuation funds.”

The SMSF and members now only need to meet two rules to be eligible for concessional tax treatment:

• The fund must be established in Australia or hold an asset in Australia
• The members cannot be temporarily absent from Australia for more than five years.

Mr Rafton said these changes will enable SMSF members to be absent from Australia for longer than is currently the case, whether for work, education or due to COVID-19.

“Members can also continue to contribute to their Australian SMSF without penalty within the five year period,” he explained.

Contact a BDO expert today to learn more about what these superannuation changes mean for you and how you can most the most of them for your stage of life.