Further reducing the minimum age for Downsizer Contributions

The eligible age from which an individual can make a Downsizer Contribution to superannuation is reduced from 60 to 55 years of age. This will start from the first quarter after Royal Asset of the enabling legislation.

The Downsizer Contribution was first introduced on 1 July 2018 to allow an eligible individual to choose to make a one-off after-tax contribution to their superannuation fund of up to $300,000 per person from the proceeds of selling their home. The Downsizer Contribution does not count towards an individual’s non-concessional contribution cap, and can be made even if the individual has a total superannuation balance of more than $1.7M.

This measure aims to encourage individuals who are 55 years or older to make a once-off larger superannuation contribution to boost their retirement savings.

Change to SMSF audit requirements no longer proceeding

As part of a simplification measure announced in the 2018-19 Federal Budget, self-managed superannuation funds (SMSFs) with a history of good record-keeping and compliance were to be permitted to move from an annual audit requirement, to a three-year audit cycle.

The Government has announced it will not proceed with this reform.

Start date for relaxation to SMSF residency requirements deferred 

SMSF’s need to satisfy the ‘residency test’ at all times, which means that among others, its central management and control is in Australia. This causes problems for SMSF’s where the main beneficiaries move overseas with work or education opportunities.

The 2021-22 Federal Budget proposed to extend the central management and control test safe harbour period for the residency of SMSFs and small APRA-regulated funds (SAFs) from 2 years to 5 years, removing the active member test.

The Government will defer the commencement date for this legislation to relax the SMSF residency requirements from 1 July 2022 to the income year commencing on or after the date of Royal Assent of the enabling legislation.

The proposed extension aims to allow individual members of SMSFs and SAFs to continue contributing to their superannuation fund whilst temporarily overseas.

Amending the tax treatment of off-market share buy-backs

The Government is proposing to align the tax treatment of off-market share buy-backs (by listed public companies) with the tax treatment of on-market share buy-backs. This measure will particularly impact on superannuation funds who could obtain a tax refund for excess imputation credits attached to the dividend component of the buy-back proceeds.

If enacted, the proposed measure will apply from 7:30pm AEDT, 25 October 2022 (Budget night).

Related budget analysis

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