From 1 July 2021, a raft of new superannuation laws were introduced including changes to key superannuation rates and thresholds.
For employers
Super Guarantee increased to 10%
The minimum percentage of Superannuation Guarantee required to be paid by employers on behalf of employees has increased from 9.5% to 10% from 1 July 2021.
Superannuation Guarantee is the minimum contribution that employers are required to make on behalf of employees on their ordinary time earnings base.
Stapled funds to employees
The Your Future, Your Super measures first announced in the 2021 Federal Budget, have now been legislated – this includes limiting the creation of multiple superannuation accounts for new employees.
For employees who commence employment on or after 1 November 2021 but do not choose a super fund, employers will need to check with the ATO if that employee has an existing super account, known as a ‘stapled fund’, in order to meet their Superannuation Guarantee obligations.
For individuals
Concessional Contributions
The Concessional Contributions cap increased from $25,000 to $27,500 from 1 July 2021.
Concessional Contributions include Superannuation Guarantee (employer) contributions and contributions where you are eligible to claim a personal tax deduction in your individual tax return.
Non-Concessional Contributions
The Non-Concessional Contributions cap increased from $100,000 to $110,000 from 1 July 2021.
Non-Concessional Contributions are typically contributed to superannuation using after-tax savings.
With retrospective effect from 1 July 2020, individuals now under 67 years of age may be eligible to bring-forward up to three years’ non-concessional contributions cap in the one financial year. This means that an eligible individual could contribute up to $330,000 from 1 July 2021, subject to their Total Superannuation Balance.
But take care – an individual who has already triggered the bring-forward cap in the 2020 or 2021 financial year will not be eligible for the increased non-concessional cap difference from 1 July 2021.
Total Superannuation Balance
Since 1 July 2017, Non-Concessional Contributions could only be accepted by a complying superannuation fund if the individual’s Total Superannuation Balance was less than $1.6M at 30 June of the prior financial year.
From 1 July 2021, the Total Superannuation Balance threshold increased from $1.6M to $1.7M. This means that an individual may be eligible to make Non-Concessional Contributions, but careful planning and satisfying eligibility requirements will be crucial to utilise the bring-forward Non-Concessional Contribution cap without attracting penalties.
Transfer Balance Cap
The Transfer Balance Cap will also increase from $1.6M to $1.7M on 1 July 2021.
The Transfer Balance Cap is a lifetime limit on how much an individual superannuation fund member can move to Retirement Phase (i.e. tax-free pension account). This threshold was introduced as part of the Super Reforms that took effect from 1 July 2017.
Every individual has their own personal Transfer Balance Cap – this means that not everyone will be able to get the full benefit of the $100,000 increase from 1 July 2021.
For example, if you have already utilised the full $1.6M Transfer Balance Cap prior to 1 July 2021, you will not be eligible for any increase to your Transfer Balance Cap. We recommend seeking the advice of a superannuation specialist to ensure this is correctly determined according to your specific circumstances.
The increase to superannuation caps and thresholds is a welcome planning opportunity for individuals to maximise their superannuation for retirement.
For SMSF Trustees
Increase maximum SMSF members from four to six
At 1 July 2021, the maximum number of allowable members in any new or existing self-managed superannuation fund (“SMSF”) increased from four to six individuals.
This ability to add more members provides opportunities and greater flexibility for the joint management of retirement savings, particularly for larger families.
But before SMSF trustees rush to add members five and six, it will be important to carefully consider the impact of adding additional members (and therefore additional trustees and/or trustee directors). SMSF trustees are jointly responsible for the ongoing operation and decision-making for the SMSF, and court cases over recent years have highlighted the importance and impact of this role in the areas of control over the SMSF and the potential estate planning implications for SMSF members and their families.
SMSFs and SuperStream from 1 October 2021
The SuperStream standard allows the transmission and reporting of all superannuation transactions to be undertaken electronically in a standard format.
From 1 October 2021, any rollovers into or out of an SMSF must be undertaken via SuperStream. If any SMSF trustees want to undertake such rollovers in future, SMSF trustees should take steps to review their current arrangements and ensure they are SuperStream compliant:
- Electronic Service Address (“ESA”) – which can be obtained from a SMSF messaging service provider (the ATO has provided a list on their website: https://www.ato.gov.au/Super/Superstream/Self-managed-super-funds/electronic-service-address/register-of-SMSF-messaging-providers/);
- A valid Australian Business Number (“ABN”), and
- The SMSF details are up to date with the ATO – including the SMSF bank account details.
For more information regarding any of these changes and how they may impact you, please reach out to your local William Buck advisor.
