The following superannuation changes came into effect on 1 July 2020.
Here’s what you need to know:
Early release of super
You can withdraw up to $10,000 from your super account this financial year if you are suffering financial hardship due to the economic impact of COVID-19. This is in addition to the $10,000 you could withdraw last financial year.
It must be stressed though, that the early withdrawal of your super should be a last resort because of the adverse impact on your retirement savings. An amount of $10,000 withdrawn early in your working life could potentially be worth many times that by the time you retire.
If, after weighing up your financial options, you wish to take advantage of this temporary measure then you need to apply by 24 September 2020.
Contribution to age 67
Under changes to the work test, if you are aged 65 or 66 you can now contribute to super even if you are not working. This gives you the flexibility to make voluntary catch-up contributions for a few more years and give your retirement savings a last-minute boost.
Therefore, you can now make a voluntary non-concessional contribution to your super account up to the annual limit of $100,000, even if you are not currently working enough hours to satisfy the work test.
Under the work test, which now commences at age 67, you must work at least 40 hours within 30 consecutive days in the financial year in which you make the contribution.
It was also proposed to allow people, aged 65 and 66 at the start of the financial year, to use the existing non-concessional bring forward rules. If eligible, this allows you to ‘bring forward’ up to three years’ worth of non-concessional contributions (up to $300,000) in the current financial year.
Note, however, that legislation must be passed before this proposal becomes effective.
Contribute to your spouse’s superannuation
Couples also have more flexibility to grow their retirement savings later in life, thanks to recent changes to spouse contributions. As of 1 July 2020, you can contribute to your spouse’s super fund until they reach age 75, up from the previous age limit of 70.
What’s more, if your spouse (married or de facto) earns less than $37,000 you may be able to claim a tax offset of up to $540 for your contribution to their super. The offset phases out once your partner’s income reaches $40,000.
The usual non-concessional contribution limits still apply, and the receiving spouse still needs to meet the work test where applicable.
Super pension drawdowns halved
Retirees whose superannuation has taken a hit from the COVID-19 market volatility have also been given assistance this financial year. The government has temporarily halved the minimum amount retirees must withdraw each financial year from their account-based super pension.
This temporary measure will help retirees who might otherwise have to sell shares or property at depressed prices to provide cash for their pension payments.
Table 1: Minimum pension drawdown rates (as a percentage of your super pension account balance)
|Age of beneficiary||Temporary withdrawal rate|
2019-20 and 2020-21
|Normal withdrawal rate|
|65 to 74||2.5%||5%|
|75 to 79||3%||6%|
|80 to 84||3.5%||7%|
|85 to 89||4.5%||9%|
|90 to 94||5.5%||11%|
|95 and older||7%||14%|
Super guarantee amnesty for employers
If you run your own business and you have not paid the correct amount of super to your employees, then the Australian Taxation Office (ATO) is offering a temporary amnesty to correct your employees’ superannuation contributions.
You have until 7 September 2020 to disclose and pay any unpaid Super Guarantee (SG) amounts for your employees. These contribution shortfalls can be from any quarter from 1 July 1992 to 31 March 2018.
Under the amnesty, you will not have to pay the administration charge or Part 7 penalty (up to 200 per cent of the Superannuation Guarantee Charge). You can also claim a tax deduction for your payments.
Should you require more information about these Superannuation Changes, submit an online enquiry now or call Peter Quinn on +61 2 9580 9166. We also offer a FREE 45-minute consultation should you have other financial planning, taxation or superannuation issues you may wish to discuss.
The information in this document does not take into account your personal objectives, financial situation or needs, and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.