Good news for anyone wishing to contribute more to super: from 1 July 2021, the concessional contribution cap increased from $25,000 to $27,500. The non-concessional cap increased from $100,000 to $110,000 following indexation is the first increase in contribution caps since 2017.
The concessional contribution cap includes mandated superannuation guarantee amounts (keeping in mind this also increased from 9.5% to 10% on 1 July 2021), salary sacrifice and any after-tax personal contributions that you claim a tax deduction for. If you have multiple super accounts, your concessional cap also includes contributions across all accounts.
‘Bring Forward’ Rule Age Increase
Along with the increase in the non-concessional cap, the age to utilise the ‘bring-forward rules’ has increased from 65 to 67, meaning if you are aged under 67 and meet other total super balance requirements, you can ‘bring forward’ three years of the non-concessional cap at once.
Removal of excess contributions charge
Previously to 1 July 2021, if you exceeded your concessional contribution cap for the year, the ATO would add amount onto the excess that is included in your tax return as assessable income that they called the ‘excess concessional contributions charge’ Conceptually, this was like interest on the extra tax bill. This was designed to add extra incentive to not exceed the cap by charging interest on the amount that has benefited from being in super and subject to a lower tax rate.
The change from 1 July 2021 will be to remove this excess concessional contribution charge. Note that this only applies to contributions made after 1 July 2021. You may still receive an excess contributions determination from the ATO that includes the cost if the excess relates to contributions made in prior financial years.
The rest of the excess contributions process will remain the same, in that the excess amount will still be added to your personal income tax return for the year the contribution was made and taxed at your marginal rate (less a 15% tax offset to reflect the tax already paid by your super fund).
SMSF Superstream requirements for rollovers
SuperStream is an electronic data exchange currently used by some funds to receive data about contributions & rollovers from other funds. From 1 October 2021, it will be compulsory for your SMSF to use Superstream if:
- One of the SMSF members has super in another fund (e.g. an industry or retail fund), and they want to roll over all or part of that super to your SMSF. This will be common if your SMSF was only established recently or a new member has recently joined the fund.
- One of the members of your SMSF wants to transfer their benefits out of the SMSF (e.g. the members have divorced/separated).
- You want to wind up the SMSF (e.g. because the fund no longer suits your needs), and as part of the wind-up process, the members’ benefits will be transferred to other funds (e.g. industry or retail funds)
If the members of your fund are planning rollovers in or out of the fund, it is important to let your accountant know as soon as possible, as the new rules also mean rollover requests in or out of SMSFs need to be actioned within three business days.
COVID 50% Pension Drawdown Relief Extended
The Federal Government has announced an extension of the temporary 50% reduction in minimum drawdown rates for an extra year to cover the 2021-22 financial year. SMSF members who draw a pension are only required to withdraw half of their standard rates due to losses in financial markets harming superannuation balances. This relief measure will help SMSF members to avoid the forced sell-down of assets to fund pension payments.
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**The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.