As you all know, the 2022-2023 Federal Budget establishes the Government’s economic and fiscal policy for an upcoming year. It is important to note that there are a series of measures announced in previous Budgets that have now been legislated and will come into effect from 1 July 2022. A summary of these changes are as follows:
Super Guarantee Rate increase
From 1 July 2022, employees who are eligible to receive the Superannuation Guarantee, can expect an increase from 10% to 10.5% . This will assist in better retirement savings for millions of Australians!
New Age threshold for Downsizers
The eligibility for downsizer contributions will be lowered from age 65 to 60, allowing retirees to contribute up to $300,000 to their super from the sale (or part sale) of their home. Couples can contribute up to $300,000 each.
Please note that proceeds from the home sale that are transferred to super accounts will be included in the asset test for the Age Pension, with the principal place of residence remaining exempt from the test.
Abolishing the Work test for people aged between 67 and 74
From 1 July 2022, the work test will be abolished. Currently, the work test requires you to be employed for at least 40 hours in a consecutive 30-day period during a financial year, before any voluntary contributions are accepted – before tax or after-tax.
However, existing contribution cap arrangements will still apply – $1.7million cap on lifetime contributions as well as the annual concessional and non-concessional caps. Members are also required to meet the work test to be eligible to claim a tax deduction on their voluntary contributions.
Removal of $450 monthly income threshold
As of 1 July 2022, the $450 minimum monthly income threshold will be removed. This means all workers, regardless of how much they earn, will be entitled to receive employer super payments. Employees must still meet other super guarantee eligibility requirements.
Increased flexibility of Pension Loans Scheme
The Pension Loans Scheme (PLS) (now Home Equity Access Scheme) is a voluntary non-taxable fortnightly loan, provided by the Government. This is designed to help boost the retirement income of eligible age pensioners by unlocking real estate equity. Through the PLS, pensioners currently receive regular fortnightly payments which accrue as a debt secured against their property.
To increase the flexibility of the PLS, the Government will introduce a No Negative Equity Guarantee (NNEG) for PLS loans. The NNEG will mean a person will never owe more than the market value of their property the loan is secured against. Age pensioners will also be given access to capped advance payments.
The scheme will provide immediate access to lump sum payments of up to about $12,385 for singles and about $18,670 for couples per year.