From 1 July 2021, there are significant superannuation regulation changes that may affect your SMSF. We are currently updating the contents on our website progressively to reflect these post 1 July 2021 changes. In the meantime, you may refer to the summary below for the key Superannuation Rates and Thresholds changes.
Concessional Contributions Changes
1. Super Guarantee Rate Increases to 10%
Superannuation Guarantee Contributions (SGC) are contributions made by an Employer for the benefit of an SMSF Member.
Prior to 1 July 2021, that figure was 9.5% of your before-tax salary income. From 1 July 2021, your employer is required to contribute a minimum of 10% of your before-tax salary income into your super account. The SGC rate is scheduled to progressively increase to 12% by July 2025.
Superannuation Guarantee Contributions, along with Salary Sacrifice Contributions and Personal Concessional Contributions count towards the Concessional Contributions Cap. If you intend to make Salary Sacrifice Contributions and/or Personal Concessional Contributions in addition to the Superannuation Guarantee Contributions made by your employer, please ensure you will not exceed the Concessional Contributions Cap given your Superannuation Guarantee Contributions are expected to increase after 1 July 2021.
Please click here to check the SGC rate on the ATO website.
2. Concessional Contribution Cap Increases to $27,500
Concessional Contributions are contributions where a tax deduction has been claimed, either by the Member or by an Employer. Concessional Contributions include the following Contribution Types:
- Salary Sacrifice Contributions
- Personal Contributions where a tax deduction is claimed
From 1 July 2017 to 30 June 2021, the annual Concessional Contributions Cap was $25,000 per member. From 1 July 2021, the Concessional Contributions Cap increases to $27,500. The increase is a result of indexation in line with average weekly ordinary time earnings (AWOTE).
The limit applies to the total of your Employer, Salary Sacrifice and Personal Concessional Contributions.
We caution that other requirements such as the age requirements for voluntary Concessional Contributions for members aged under 75 and the work test requirements for members aged over 67 remain unchanged after 1 July 2021.
3. Removal of Excess Concessional Contributions Charge
Prior to 1 July 2021, if you exceeded your Concessional Contributions Cap, the Excess Contributions over the Concessional Contribution Cap were taxed at your actual marginal tax rate, plus an interest charge calculated by the ATO (as would happen for income tax paid late to the ATO).
From 1 July 2021, penalties for exceeding the Concessional Contributions Cap are reduced. The Excess Concessional Contributions charge will no longer be payable where a member exceeds their Concessional Contributions Cap and has the amount of excess Concessional Contributions included in their personal assessable income.
Non-Concessional Contributions Changes
1. Non-concessional Contributions Cap Increases to $110,000
Personal Contributions made into an SMSF from after tax income on which no tax deduction is claimed are known as Non-concessional Contributions. Non-concessional Contributions are personal contributions made into your SMSF from your own personal Bank Account and not from your Employer.
From 1 July 2017 to 30 June 2021, the annual Non-concessional Contributions Cap was $100,000 per member. From 1 July 2021, the Non-concessional Contributions Cap increases to $110,000. The increase is a result of indexation in line with average weekly ordinary time earnings (AWOTE).
2. Total Superannuation Balance (TSB) Eligibility Threshold Increases to $1.7 million
Your eligibility for Non-concessional Contributions depends on your Total Superannuation Balance on 30 June of the previous Financial Year.
From 1 July 2017 to 30 June 2021, if you had a Total Superannuation Balance (TSB) of $1.6 million or more on 30 June of the previous Financial Year, you were not eligible to make Non-concessional Contributions. From 1 July 2021, the TSB Eligibility Threshold increases to $1.7 million. The increase is a result of indexation in line with average weekly ordinary time earnings (AWOTE).
We caution that other requirements such as the age requirements for members aged under 75 and the work test requirements for members aged over 67 remain unchanged after 1 July 2021.
3. Bring Forward Arrangement
If you make Non-concessional Contributions above the annual Non-concessional Contributions Cap, you may be able to make Non-concessional Contributions of up to two or three times the annual Non-concessional Contributions Cap in that Financial Year (i.e. $220,000 cap over two years or $330,000 cap over three years). This is known as the bring-forward arrangement. It allows you to make extra Non-concessional Contributions without having to pay extra tax.
Eligibility for the bring-forward arrangement depends on the following two factors:
Your age; and
- Total Superannuation Balance on 30 June of the previous Financial Year.
1) Age Restriction Extended to 67 from 1 July 2020
Prior to 30 June 2020, if you were under 65 years of age at any time in a Financial Year, you could access the bring-forward arrangement if all other requirements were met. From 1 July 2020, the cut-off age for accessing the bring forward arrangement extended to be under 67 years of age at any time in a Financial Year.
If you are aged 65 or 66 on 1 July of the current Financial Year and you have not previously triggered the bring-forward rule in the preceding two Financial Years, you may access the bring-forward arrangement in the current Financial Year if all other requirements are met. If you are already 67 years old or older on 1 July of the current Financial Year, you cannot access the bring-forward arrangement.
2) Total Superannuation Balance on Previous 30 June
The following table sets out the bring forward cap and bring forward period depending on the individual's Total Superannuation Balance on 30 June of the previous Financial Year after 1 July 2021:
|Total Superannuation Balance on 30 June
||Contribution and Bring Forward Available
|less than $1.48 million||3 year ($330,000)|
|$1.48 - $1.59 million
||2 years ($220,000)
|$1.59 - $1.7 million
||1 year ($110,000)
|$1.7 million or more
3) Special Case: Bring Forward Triggered in the 2019/2020 or 2020/2021 Financial Year
Once you trigger the bring-forward arrangement in a year, any changes to the Non-concessional Contributions Cap for the bring-forward period doesn’t apply to you. The bring-forward cap amount is set based on the cap in the first year of the period.
We caution that if you triggered the bring-forward arrangement in the 2019/2020 or 2020/2021 Financial Year by contributing more than $100,000 Non-concessional Contributions, your bring-forward cap will still be $300,000 ($100,000 × 3 years) or $200,000 ($100,000 × 2 years) if all other requirements are met.
Other Contributions Changes
1. Spouse Contributions
You can make contributions on behalf of your spouse if your spouse is under 67 years of age or your spouse has reached 67 years of age but not reached 75 years of age , and worked at least 40 hours in a period of no more than 30 consecutive days during the financial year. An 18% income tax rebate for contributions up to $3,000 per annum applies. That is a maximum rebate of $540 pa.
From 1 July 2021, the Total Superannuation Balance (TSB) Eligibility Threshold that prohibits an individual from claiming the tax offset increases from $1.6 to $1.7 million. Individuals will be able to claim the offset for contributions they make on behalf of their spouse, provided the spouse's TSB is not more than $1.7 million on 30 June 2021, if other criteria are met.
If your income is within the predetermined thresholds and you make a Non-concessional Contribution in a Financial Year, the government will match your contribution with a co-contribution up to certain limits.
The income thresholds are indexed for the 2021/2022 Financial Year with the lower income threshold increases to $41,112 and the higher income threshold increases to $56,112.
Secondly, the Total Superannuation Balance (TSB) Eligibility Threshold that determines if an individual is entitled to a co-contribution increases from $1.6 to $1.7 million. Individuals with a TSB of less than $1.7 million on 30 June 2021 will be entitled to a co-contribution, if other criteria are met.
1. Reduction of Minimum Pension Factor Extends to 2021/2022 FY
The Government has previously reduced superannuation minimum withdrawal limits for Pensions by 50% for the 2019/2020 and 2020/2021 Financial Years and it has been confirmed that the 50% reduction continues to apply to the 2021/2022 FY.
||Default Minimum Pension Factor
||Reduced Minimum Pension Factor for 2019/2020, 2020/2021 & 2021/2022 FYs
|65 - 74
|75 - 79
|80 - 84
|85 - 89
|90 - 94
|95 or more
We caution that if you have already withdrawn more than the reduced minimum withdrawal limit, unfortunately you cannot reimburse the SMSF. Any such amount would be considered a contribution and be subject to the contribution rules. In addition, you cannot forgo making any withdrawals in the following Financial Year.
2. General Transfer Balance Cap Indexes to $1.7 million
The Transfer Balance Cap (TBC) is a lifetime limit on the total amount of superannuation benefits that can be transferred into the tax-free Retirement Phase account, including most pensions and annuities. Superannuation benefits accumulated in excess of the cap can remain in the Accumulation Account, where the earnings are taxed at up to 15%.
From 1 July 2017 to 30 June 2021, the Transfer Balance Cap (TBC) was set at $1.6 million. From 1 July 2021, the general Transfer Balance Cap (TBC) increases to $1.7 million. The increase is a result of indexation in line with average weekly ordinary time earnings (AWOTE).
There won't be a single cap that applies to all individuals. Every individual will have their own Personal Transfer Balance Cap of between $1.6 and $1.7 million, depending on their circumstances.
Case One: Commence a retirement phase income stream for the first time on or after 1 July 2021
If you start a retirement phase income stream for the first time on or after 1 July 2021, you will have a Personal Transfer Balance Cap of $1.7 million.
The following types of income streams are treated as a retirement phase income stream:
Case Two: Commenced a retirement phase income stream before 1 July 2021 and TBC previously reached $1.6 million
If you commenced a retirement phase income stream with any Superfunds and you have previously reached the $1.6 million TBC threshold before 1 July 2021, your Personal Transfer Balance Cap is not entitled to indexation and it remains as $1.6 million after 1 July 2021.
This means if your Pension balance subsequently decreased due to pension withdrawals or investment losses, you will not be able to transfer any more into the Retirement Phase even if the general Transfer Balance Cap has been increased to $1.7 million as you have utilised 100% of your cap space previously.
Case Three: Commenced a retirement phase income stream before 1 July 2021 and $1.6 million not fully utilised yet
Your Personal Transfer Balance Cap will be between $1.6 million to $1.7 million subject to proportional indexation. The amount of cap space you have available will be determined by the proportionate method based on the highest ever balance of your Transfer Balance Account.
For example, if you transferred $1.2 million into a Retirement Phase account before 1 July 2021, you had utilised 75% of the cap space. Therefore you will be able to transfer an additional 25% of the indexed cap.
- Personal Transfer Balance Cap: $1.625 million ($1.6 million + 0.25 * $100,000).
- Additional balance that can be converted to Retirement Phase: $425,000 ($1.625 million - $1.2 million).
The ATO will calculate your entitlement to indexation and your Personal Transfer Balance Cap after indexation. You can view your Personal Transfer Balance Cap using the ATO online services through myGov. If you do not yet have a myGov account, you are highly encouraged to create one. Alternatively you may contact the ATO on 13 10 20 directly to obtain this information.
3. Low Rate Cap Increases to $225,000
When you are between your preservation age and 60 years old, the tax on Lump Sum withdrawals made (provided you are eligible) is affected by the low rate cap amount. The taxable component of the amount withdrawn which is below the low rate cap amount is tax free. The low rate cap amount for the 2021/2022 Financial Year increases to $225,000 (it was $215,000 for the 2020/2021 Financial Year).
For more information on low rate cap and how it affects the tax payable on Lump Sum withdrawals, please click here.
Other Covid-19 Changes
1. Applications for COVID-19 Early Release of Super Closed on 31 December 2020
The ATO no longer accepts COVID-19 Early Release Applications after 31 December 2020. However you may still be able to withdraw some of your super early (see examples below) provided you meet all the eligibility criteria and you have the proper documentation to demonstrate your eligibility.
- Access due to severe financial hardship;
- Access on compassionate grounds;
- Access due to permanent incapacity;
- Access due to temporary incapacity;
- Access due to a terminal medical condition.
Please also note that if you access your Super Benefits before Preservation Age under the above early access provisions, you may be liable for personal tax.
Please visit our website here for the detailed information (i.e. eligibility criteria, documents required, maximum withdrawal limit, tax implications etc.) should you wish to access Super Benefits early under any of the above provisions.
We caution that if you begin to access your Super Benefits and do not meet any of the conditions allowing you to access your Super Benefit early, you are breaking the law and significant penalties may be imposed on you and your SMSF (both criminal and civil).
2. Rental Relief / Loan Payment Relief during the COVID-19 Crisis
If your SMSF owns a rental property or has a limited recourse borrowing arrangements, temporary rental relief or loan payment relief may be applicable for your SMSF. While this would normally trigger a range of SIS Act compliance breaches, the ATO indicated that it would not be taking compliance action for either the 2019/2020 or 2020/2021 Financial Years if certain requirements are met.
For more information on the requirements for rental relief or loan payment relief, please click here.