Superannuation changes from 1 July 2021
With a new financial year well and truly underway, it is timely to highlight some of the recent changes to the superannuation rules for the 2021/2022 financial year.
Increase to the Superannuation Guarantee contribution rate
The Superannuation Guarantee (SG) contribution rate has increased to 10% (up from 9.5%) from 1 July 2021. Therefore, to make sure employers are paying their employees the correct amount of superannuation on their salary and wages, employers should ensure that their payroll and accounting software is updated to incorporate the increase in the contribution rate.
Increase to the contribution caps
From 1 July 2021, the superannuation contribution caps have been indexed accordingly.
The concessional contributions cap has increased to $27,500 per member (up from $25,000). The most common types of concessional contributions are Superannuation Guarantee and salary sacrifice contributions, as well as personal contributions that individuals claim a tax deduction for in their personal tax returns.
With the increase to the concessional contributions cap in mind, individuals may wish to review and adjust any salary sacrifice arrangements accordingly.
The non-concessional contributions cap has also increased to $110,000 per member (up from $100,000) – the most common contribution of this type being personal contributions that the individual is not claiming a tax deduction for in their personal tax return.
Due to the indexing of the non-concessional contributions cap, the amounts able to be contributed to superannuation under the ‘bring forward’ arrangement have also changed accordingly.
The ‘bring-forward’ arrangement allows members under 67 years of age to make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year, by bringing forward the non-concessional cap for a two- or three-year period. It is important to remember that the non-concessional cap amount you can bring forward, and whether you have a two- or three-year period will depend on your total superannuation balance at the end of 30 June the previous financial year.
|Total Superannuation Balance on 30 June 2021||Maximum non-concessional contributions cap for the first year||Bring-forward period|
|Less than $1.48 million||$330,000||3 years|
|$1.48 million to less than $1.59 million||$220,000||2 years|
|$1.59 million to less than $1.7 million||$110,000||No bring-forward period, general non-concessional contributions cap applies|
As a reminder, current superannuation contribution eligibility rules prohibit a Super Fund from accepting contributions from members aged between 67 and 74 years of age, unless they have worked 40 hours in 30 consecutive days during the financial year prior to the contribution being made.
Indexation of the general transfer balance cap
The general transfer balance cap was indexed from 1 July 2021 to $1.7m (up from $1.6m). The transfer balance cap is essentially the maximum amount of superannuation benefits that a member can have in ‘retirement phase’ across all of their superannuation funds.
Why is the indexing of this cap of great significance? From 1 July 2021 there won’t be a single transfer balance cap that applies to all individuals. Every individual will have their own personal transfer balance cap of between $1.6m and $1.7m depending on their circumstances.
- If a member starts a retirement phase income stream (i.e. a pension) for the first time on or after 1 July 2021, the member will have a personal transfer balance cap of $1.7m.
- If a member had a transfer balance account before 1 July 2021 and if, at any time between 1 July 2017 and 30 June 2021 the balance of their account was $1.6m or more, the member’s personal transfer balance cap will remain at $1.6m.
- However, if a member has never used the full amount of their transfer balance cap, the member’s personal transfer balance cap will be proportionally indexed from 1 July 2021 based on the highest ever balance of their transfer balance account.
Increase in SMSF members
The superannuation bill to increase the number of members of a Self-Managed Superannuation Fund received royal assent on 22 June 2021.
Therefore, this means that from 1 July 2021, Self-Managed Superannuation Funds are permitted to have 6 members instead of 4 (as was previously allowed under the legislation). However, it is important that Trustees check the Trust Deed of the Fund to ensure the Deed allows for it.
How can we help?
We recognise the importance of education and being supported with resources to assist you to feel informed and in control of your self-managed super fund journey.
Our self-managed super fund educational resources can be found here: https://vincents.com.au/business-advisory/superannuation-advisory/resources/
As SMSF Specialist Advisors, your Vincents SMSF team can also help clear up any additional questions you might have about self-managed super funds.
An Important Message
While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.