The Australian Taxation Office (ATO) has announced that superannuation contribution caps will increase from 1 July 2021.
In addition, several ‘Your Future, Your Super’ reforms announced in last year’s Federal Budget are due to take effect on that date.
Here’s what you need to know about some of the changes:
The ATO has confirmed that, from 1 July 2021, the superannuation concessional (before-tax) contribution caps and non-concessional (after-tax) contribution caps will be increased as follows:
|Cap||Old cap||New cap|
|Non-concessional||$100,000 (or $300,000 over 3 years)||$110,000 (or $330,000 over 3 years)|
Also, the total super balance limit over which you cannot make non-concessional contributions has been increased from $1.6 million to $1.7 million.
What are non-concessional contributions?
If you’d like to make extra contributions but haven’t already reached the $25,000 concessional cap for 2020–21, you have until 30 June 2021 to do so.
From 1 July 2021, the superannuation guarantee — the minimum amount an employer must pay into an employee’s super fund — will increase from 9.5% to 10%.
(It will continue to rise by 0.5% a year until it reaches 12% in 2025.)
If you’re a business owner, you should contact your payroll provider to ensure everything is in place to accommodate the change.
When an employee changes job, they must nominate their super fund — otherwise their new employer will put the employee’s super into a ‘default’ fund selected by the employer (also known as a MySuper fund).
From 1 July 2021, though, members will keep their current super fund when they change jobs.
‘Stapling’, as it’s referred to by the federal government, is designed to help reduce unintended multiple accounts.
This in turn will help reduce members’ paperwork and fees, make it easier for them to track their super, and help them avoid paying multiple insurance premiums.
From 1 July 2021, MySuper funds will be subject to an annual performance test.
The test will compare the funds’ performance to a benchmark set by the regulator, the Australian Prudential Regulation Authority (APRA).
Underperforming funds will be listed as ‘underperforming’ in a new YourSuper comparison tool (this tool is another of the changes occurring to super in 2021–22).
They will remain listed until their performance improves.
Funds that underperform over two consecutive years will not be allowed to accept new members until their performance improves to an acceptable level.
The testing regime will be expanded from MySuper products to all super products from July 2022.
Concessional contributions are those made using before-tax dollars; or personal contributions you claim as a tax deduction. There are three types:
Concessional contributions are usually taxed at 15% (30% if you earn more than $250,000 a year).
This is lower than most personal income tax rates and so these contributions are a tax-effective way to save for retirement.
Non-concessional contributions are contributions made using after-tax dollars and which you do not claim a tax deduction on.
Your ability to make after-tax personal contributions to super depends on your age.
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