New Financial Year, New Rules

The new financial year starts on Friday this week, so it is timely to have a look at your financial arrangements and ensure you are well positioned for the coming twelve months.

What has changed?

Superannuation rules have been updated, and the changes come into effect from 1 July 2022.  We will cover off on much of this in our webinar on Tuesday this week, but for those who will miss it here is a quick snapshot:

• Superannuation guarantee contributions must be paid for all adult employees, even if they earn less than $450 per month.
• The superannuation guarantee rate is increasing from 10% to 10.5% … so employers need to ensure their single touch payroll system is updated and takes this into account.
• The First Home Saver Scheme has been updated, with the maximum withdrawal amount increasing from $30,000 to $50,000. This will further assist first homeowners to save for their first home.
• For those selling their home and wanting to boost their super, it is now easier to use the downsizer contribution rules. Previously, you had to be over 65 years of age to make a downsizer contribution to super, however, from 1 July, you will be able to do so if you are over 60 years of age.  This is a fantastic opportunity to get more money into superannuation where earnings are concessionally taxed.  All the other eligibility requirements still apply.
• From 1 July, those aged over 67 but under 75, will be able to contribute to superannuation. Currently people in this age group must work for 40 hours over a 30-consecutive day period (the work test) before being eligible to contribute to super.  From the new financial year, this rule is abolished for all but personal contributions for which you are claiming a tax deduction.

While all these rule changes are important, it is probably this last one that will provide the most opportunity for a review of your superannuation strategy.

Not only can you contribute to superannuation up to the age of 75, but you can also use the ‘bring-forward rule’ up to that age.  Normally, you can contribute $110,000 each year to super as a non-concessional contribution.  You can also bring forward two future years into the current year to make a maximum contribution of $330,000.  This can be done if your Total Superannuation Balance is under $1.7 million.

If you are interested in maximising the value of your eventual estate and you are currently under 75 years of age, you could consider utilising a withdrawal and re-contribution strategy.  Such a strategy involves the withdrawal of money from superannuation, then recontributing those same funds back to superannuation as a non-concessional contribution.  It also involves using the establishment of account-based pensions to isolate the newly contributed funds from the rest of the money you have in superannuation.

While complex and involving plenty of paperwork and some notifications to the tax office, the benefit can be substantial, particularly for your estate beneficiaries.  Given the complexity surrounding such a strategy, I recommend you contact our office on 03 8548 4800 to speak to one of our advisers to ensure the strategy is appropriate to you.

Disclaimer: Any information, financial product or advice provided in this website is general in nature.  It does not take into account your needs, financial situation or objectives.  Past performance is not a reliable indicator of future performance. Before acting on the advice, you should consider whether it is appropriate to you in light of your needs, financial situation and objectives.