Amongst all the Parliamentary COVID-19 discussions, one would be forgiven to think that they have time for anything else. As of 1 July 2020, there have been a few superannuation legislation changes which may impact the ability to build your superannuation balance.
Here are the 2 key take outs:
Contributing to Super aged over 65 years-
Passing legislation effective 1 July 2020, for the 2020-21 financial year onwards, you no longer need to meet the work test if you are 65 or 66 years old to make concessional contributions to super^.
Furthermore, the age extension measure is currently being proposed to also apply to non-concessional contributions and the ability to apply the “bring forward rule” ($300,000) before you turn 67. Please note that the NCC age extension Bill is not yet law.
What does this mean-
If you are age between 65-67 you can make a personal concessional contribution, to the allowable cap of $25,000 pa, without meeting the work test*
Should your super balance be less than $1.6M per member, you can continue to make non-concessional contributions up to the allow cap of $100,000pa until your 74th year.
If your super balance is less than $1.6M per member, should the Bill pass, and the age extension apply to non-concessional contributions, you will have the ability to utilise the bring forward rule and contribute up to $300,000 in one year. This could potentially lead to a total contribution of $500,000.
Please note, as introduced 1 July 2017, you can only make non-concessional contributions if your superannuation/pension balance is less than $1.6M
One way to increase your partner’s super balance is by splitting up to 85% of your concessional super contributions with them, which you either made or received in the previous financial year.
From 1 July 2020, your spouse can accept a spouse contribution if they are 70–74 years old. Essentially, legislation has been passed extending the accepting spouse’s age bracket.
For more information on spouse splitting contributions refer to our blog article of April 2019- Could it be time to (contribution) spouse split?
Your Sovereign Wealth adviser will guide you on how best to maximise your contributions. However, should you wish to discuss possible strategies and how it may benefit you and/or your spouse, please call Sovereign on (02) 8216 1777.
^ Concessional super contributions (capped at $25,000 pa) can include employer and or salary-sacrifice contributions, as well as contributions you may have claimed as a personal tax deduction.
* To satisfy the work test, you must work at least 40 hours during a consecutive 30-day period each financial year in which the contributions are made.
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