Superannuation Changes and Tax Planning 2022

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Superannuation Changes and Tax Planning 2022

As the end of the Financial Year approaches, many will be looking at their superannuation and making top up contributions before 30 June 2022. Businesses will similarly need to prepare for a number of changes that affect how much superannuation they will need to pay their employees from 1 July 2022.

Concessional Contributions:

The Concessional Contributions cap is $27,500 for the 2022 financial year. This includes Superannuation Guarantee contributions, Salary Sacrifice Contributions and personal deductible contributions made to a members superannuation account. It is important that where members wish to claim their superannuation contributions personally they ensure they do the following:

  1. Ensure they make the payment early enough so it is received by their superannuation fund by 30 June.
  2. Complete a Notice of Intent to claim and send it to their superannuation fund.
  3. Ensure they receive acknowledgement that the Notice of Intent has been received. This must be received prior to the due date for lodgement of the Individual’s Income Tax Return for the year they wish to claim the deduction.

It is important for members to also bear in mind their carry forward concessional contributions cap which allows members with a balance of under $500,000 to carry forward any unused caps for up to 5 years and claim a larger deduction in the year they wish to utilise their unused cap. This measure applied from 1 July 2018 so members who have not utilised all of their prior year contribution caps may be able to make a larger contribution in the 2022 financial year. A table below illustrates an example where a member did not utilise their whole cap in prior years and wish to do so in 2022.

 

Financial Year Annual Concessional Contributions Cap Total Concessional Contributions cap including carry forward amounts Concessional Contributions made Unused cap that can be carried forward
2018/19 $25,000 $25,000 $10,000 $15,000
2019/20 $25,000 $40,000 $10,000 $30,000
2020/21 $25,000 $55,000 $10,000 $45,000
2021/22 $27,500 $72,500 $72,500 $-

 

Non Concessional Contributions:

The Non Concessional Contributions cap is $110,000 for the 2022 Financial Year. Members who are eligible can also utilise the bring forward provisions and contribute up to 3 years’ worth of Non Concessional contributions ($330,000).

Eligibility to make Non Concessional contributions requires two tests to be satisfied in the current year.

  1. The work test must be satisfied. This test requires all members aged between 67 and 74 to demonstrate that they have been gainfully employed for 40 hours or more in any 30-day period in a financial year in order to contribute.
  2. A member’s Total Superannuation Balance must be under $1.7 million. No Non Concessional contributions can be made where a member’s balance is $1.7 million or more. Access to the bring forward provisions is also dependent on what a member’s balance is at 1 July each year. The table below illustrates this for a member wishing to utilise the bring forward provisions in the 2022 financial year.
Total Superannuation Balance at 30 June 2021 Non Concessional contributions cap for year (utilising bring forward provisions) Bring forward period
Less than $1.48 million $330,000 3 years
$1.48 million to less than $1.59 million $220,000 2 years
$1.59 million to less than $1.7 million $110,000 Non bring forward period available
$1.7 million or more $nil Not Applicable

Downsizer Contributions:

Since 1 July 2018, those who are 65 or older have been able to make a Non-Concessional contribution into their superannuation account of up to $300,000 from the proceeds on the sale of their family home provided they owned the home for 10 years and meets the test for the main residence exemption. This contribution can be made outside of the usual conditions and caps associated with other Non-Concessional Contributions such as Total Superannuation Balance restricting non concessional contributions for members with balances over $1.7 million. In order to utilise this contribution the seller of the home must make the payment to their superannuation fund and complete the appropriate forms within 90 days of settlement of the property.

From 1 July 2022 the age requirement will also be reduced to 60 years and older allowing a greater number of people to take advantage of this measure.

Changes to Superannuation from 1 July 2022:

A number of changes affecting superannuation have been enacted in previous budgets but only take effect from 1 July 2022. Taxpayers and business should be aware of these to ensure that they comply with these from the new financial year.

Removal of work test:

The work test which requires all members aged between 67 and 74 to demonstrate that they have been gainfully employed for 40 hours or more in any 30-day period in a financial year in order to contribute has been removed effective 1 July 2022 for those who wish to make Non Concessional Contributions (subject to other conditions for making Non Concessional Contributions).

For those wishing to make personal contributions who are aged between 67-74, they will continue to be required to meet the work test in order to claim a deduction for the contribution.

Change to Superannuation Guarantee Rate:

The current Superannuation Guarantee Rate of 10% increases to 10.5% from 1 July 2022. The rate is scheduled to increase each year until it reaches 12% from 1 July 2025. The table below illustrates the rate for the current and future years:

Period Superannuation Guarantee Rate
2021/22 (Current) 10%
2022/23 10.5%
2023/24 11%
2024/25 11.5%
2025/26 and onwards 12%

 

Removal of minimum income threshold:

The $450 minimum monthly earnings threshold has been removed effective 1 July 2022. Therefore employers will need to ensure that they pay all their employees Superannuation regardless of how much they earn per month.

If you have any queries about Superannuation and the changes above, please contact Chris Schoeman.

The above information is provided as an information service only and, therefore, does not constitute financial product advice, and should not be relied upon as financial product advice. None of the information provided takes into account your personal objectives, financial situation or needs. You must determine whether the information is appropriate in terms of your particular circumstances. For financial product advice that takes into account of your particular objectives, financial situation or needs, you should consider seeking financial advice from an Australian Financial Services licensee before making a financial decision.

 

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