Information for advisers only.
1. Removal of the work test for most contribution types
Since 1 July 2022, clients aged 67-74 may receive most voluntary contributions without regard to the superannuation contributions work test or work test exemption. However, this requirement still applies to personal contributions claimed as a tax deduction.
Prior to 1 July 2022, to receive most types of voluntary contribution, clients aged 67-74 had to have been gainfully employed for at least 40 hours in any consecutive 30 day period during the financial year in which the contribution occurred or satisfied the work test exemption.
For the various types of voluntary contributions, the below table illustrates the contribution standards for 2021/22 and 2022/23.
| Contribution type | 2021/22 | 2022/23 |
|---|---|---|
| Personal non-concessional | Under age 67, or age 67-74* and satisfy the work test or work test exemption | Age 74 or younger* (no work test requirement) |
| Spouse-non-concessional | ||
| Salary sacrifice | ||
| Small business CGT (either 15-year exemption or retirement exemption) |
||
| Personal injury contributions | ||
| Personal contributions claimed as a tax deduction |
Under age 67, or age 67-74* and satisfy the work test or work test exemption | |
| Downsizer | Age 65+ at time of contribution (no work test requirement) | 1 July 2022 - 31 December 2022 Age 60+ at time of contribution (no work test requirement) 1 January 2023 onwards Age 55+ at time of contribution (no work test requirement)^ |
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* Can be received on or before the day that is 28 days from the end of the month in which the member attains age 75.
^ Since 1 January 2023, the eligibility age has reduced further to age 55 at the time of the contribution. See the section titled ‘5. Decrease to downsizer contribution eligibility age’ below for further detail.
Advice impacts:- Since 1 July 2022, a greater number of clients aged 67-74 may:-
- Without regard to the work test receive all types of voluntary contributions, except personal contributions claimed as a tax deduction.
- Be able to contribute non-superannuation funds to superannuation.
- Be able to perform a re-contribution strategy in order to increase the tax-free component of their superannuation. This could be of benefit if a future death benefit is paid to a non-tax dependant beneficiary.
2. Increase to the age non-concessional bring forward can be utilised
Since 1 July 2022, the age at which the non-concessional bring forward can be utilised increased to age 74 or younger as at the start of the financial year (previously the non-concessional bring forward could only be triggered if the client was age 66 or younger at the start of the relevant financial year).
There are four eligibility criteria to trigger the non-concessional bring forward during 2022/23:-
- The client is age 74 or younger as at 1 July 2022
- The client did not trigger the non-concessional bring forward by receiving non-concessional contributions of more than the standard non-concessional cap during either 2020/21 ($100,000) or 2021/22 ($110,000).
- If the client has attained age 75 during 2022/23 i.e. they were 74 as at 1 July 2022, the contribution must occur within 28 days from the end of the month they attained age 75.
- They satisfy the total superannuation balance criterion as illustrated by the table below.
| Total superannuation balance as at 30 June 2022 | Maximum 2022/23 non-concessional contribution |
|---|---|
| <$1,480,000 | $330,000 (three year bring forward) |
| $1,480,000 - $1,589,999 | $220,000 (two year bring forward) |
| $1,590,000 - $1,699,999 | $110,000 |
| $1,700,000+ | Nil |
Advice impacts:- Since 1 July 2022:-
- Particularly when combined with the removal of the work test, the increase to the age at which the bring forward can be utilised presents an opportunity for clients aged 67-74 to:-
– Contribute non-superannuation funds to their superannuation and (subject to the transfer balance cap) subsequently commence an account based pension (example 1), and/or
– Perform a recontribution strategy for estate planning purposes (example 2)
Example 1:-
Paul (age 68) retired several years ago, had a total superannuation balance as at 30 June 2022 of $1,495,000, and did not receive any non-concessional contribution during 2020/21 or 2021/22.
During 2022/23 Paul sells an investment property and receives proceeds of $1,000,000. After the 50% CGT discount, the assessable capital gain from the sale is $200,000.
Due to the removal of the work test and the increase to the age at which the non-concessional bring forward can be utilised, Paul can receive non-concessional contributions of up to $220,000 during 2022/23. He cannot receive the full $330,000 due to the total superannuation balance eligibility criterion.
Paul is unable to offset the capital gain via a personal contribution claimed as a tax deduction. This is because Paul is not eligible to receive this type of contribution, as he does not satisfy the work test or work test exemption.
Example 2:-
Susan (age 70) retired several years ago. She has an account based pension with a 30 June 2022 value of $700,000 (100% taxable component) and minimal funds outside superannuation.
In the event of her death, Susan’s account based pension will be paid by her superannuation fund as a lump sum death benefit to her non-dependant adult daughter Michelle.
Due to the removal of the work test and the increase to the age at which the non-concessional bring forward can be utilised, Susan can withdraw (as a lump sum) $330,000 from her account based pension, recontribute this amount as a non-concessional contribution and commence another account based pension with these newly contributed funds.
By performing the withdrawal recontribution strategy, Susan has increased the tax-free component of her superannuation by $330,000. In the event of Susan’s death, this strategy will (based on the current balance) save Michelle up to $56,100 ($330,000 x 17%) in death benefits tax.
3. Increase to the superannuation guarantee (SG) rate and removal of an exemption category
The SG rate is the minimum percentage of an employed client’s ordinary time earnings their employer must pay to their superannuation. There is also an upper limit of earnings per quarter for which an employer has to pay SG, known as the maximum super contribution base.
The 2022/23 SG rate has increased to 10.5% (from 10% in 2021/22).
Prior to 1 July 2022, employers were not required to pay SG where an employee’s ordinary time earnings was less than $450 in a calendar month. Since 1 July 2022, such employee are entitled to receive SG subject to the other exemption categories.
Advice impacts:- Since 1 July 2022:-
- Employed clients will receive a higher amount of SG for 2022/23 than 2021/22 for the same amount of ordinary time earnings.
- Clients who receive voluntary concessional contributions should take the increased SG rate into account when calculating the amount of their concessional cap available for voluntary concessional contributions.
- Many employees who earn less than $450 a month are now eligible to receive SG.
4. Another financial year of accrual for carry forward concessional contributions
Concessional contributions include superannuation guarantee, salary sacrifice and personal contributions which are claimed as a tax deduction. Unless the concessional carry forward applies, a client’s concessional contributions are limited to the standard concessional cap of $27,500 (2022/23).
Since 1 July 2022, clients who are eligible1 to utilise carry forward concessional contributions will have a 2022/23 concessional cap of up to $130,0002 minus all concessional contributions they have received within the relevant concessional caps3 since 1 July 2018.
Example 3:-
Adrian (age 57) satisfies the criteria to utilise carry forward concessional contributions including having a total superannuation balance (TSB) of <$500,000 as at 30 June 2022.
During 2022/23 he will earn taxable income of $150,000 as a sole trader.
Since 1 July 2018, Adrian has received the following concessional contributions:-
- 2018/19 - $20,000
- 2019/20 - $15,000
- 2020/21 - $24,000
- 2021/22 - $18,000
Adrian’s 2022/23 concessional cap is $53,000. This consists of the $27,500 standard concessional cap for 2022/23, plus $5,000 (2018/19 unused amount), plus $10,000 (2019/20 unused amount), plus $1,000 (2020/21 unused amount), plus $9,500 (2021/22 unused amount).
1 To be eligible to receive carry forward concessional contribution, a client must:-
- Have a total superannuation balance of <$500,000 as at 30 June of the previous financial year.
- If via a personal contributions claimed as a tax deduction, the client is under age 67 or age 67-75 and satisfies the work test or work test exemption.
- Follow the usual process and timeframes if using the carry forward via making personal contributions which are claimed as a tax deduction and generate sufficient taxable income to offset the deduction.
2 The standard concessional cap for 2018/19, 2019/20 and 2020/21 was $25,000, for 2021/22 was $27,500, and for 2022/23 is $27,500. [($25,000 x 3) + ($27,500 x 2)] = $130,000.
3 If previous concessional contributions have exceeded the client’s personal concessional cap, for this purpose the amount of the excess concessional contributions are disregarded.
5. Decrease to downsizer contribution eligibility age
A downsizer contribution allows eligible clients to contribute up to $300,000 from the proceeds of a property sale to their superannuation.
Since 1 July 2022, the eligibility age to make a downsizer contribution has reduced to age 60 at the time of the downsizer contribution (previously age 65). Since 1 January 2023, the eligibility age has reduced further to age 55 at the time of the contribution, following the passage of Treasury Laws Amendment (2022 Measures No. 2) Bill 2022.
Downsizer contributions are separate from the other contribution caps, and unlike non-concessional contributions are not subject to the total superannuation balance eligibility criterion or an upper age restriction.
A client must satisfy various eligibility criteria to make a downsizer contribution, including that the property was owned for 10 or more years, and the proceeds are either fully or partially exempt from capital gains tax under the main residence CGT exemption.
6. Continuation of reduced account based pension minimums
Superannuation income streams (most commonly account based pensions) are required to make minimum pension payment(s) each financial year.
As was the case for the 2019/20, 2020/21 and 2021/22 financial years, the minimum pension requirement has also been reduced for the 2022/23 financial year as illustrated in the table below.
| Age | Standard minimums | Reduced minimums for 2019/20 to 2022/23 financial years |
|---|---|---|
| Under 65 | 4% |
2% |
| 65-74 | 5% | 2.5% |
| 75-79 | 6% | 3% |
| 80-84 | 7% | 3.5% |
| 85-89 | 9% | 4.5% |
| 90-94 | 11% | 5.5% |
| 95 or older | 14% | 7% |
Either via standing instruction or specifying just prior to the payment, the member should elect whether each payment from superannuation is a pension payment or a lump sum withdrawals. Where a member has multiple interests in the one fund (such as an account based pension and an accumulation account), the member should follow the same principle and specify from which interest a withdrawal will be sourced.
Advice impact:- During 2022/23:-
- Clients who for various reasons want to draw as little funds as possible from their superannuation income streams will be able to continue to benefit from the reduced minimums.
Example 4:-
Rebecca (age 73) has an account based pension with a 30 June 2022 value of $1,500,000 and $500,000 in the accumulation phase of superannuation. During 2022/23, she wants to receive a total of $75,000 from her superannuation to meet her cash flow requirements.
The reduced minimums allow Rebecca to receive $37,500 ($1,500,000 x 2.5%) as pension payments from her account based pension, and the remaining $37,500 as lump sum withdrawals from her accumulation account. By doing so, Rebecca is retaining as much funds as possible within her account based pension which are subject to the 0% tax on earnings environment.
Example 5:-
Tristan and Shelly are a married couple (both age 86). They each have an account based pension with a 30 June 2022 balance of $1,000,000 with Shelly nominated as the reversionary beneficiary for Tristan’s pension and vice versa. During 2022/23 they each wish to receive a total of $100,000 their superannuation to meet their cash flow requirements.
Even though neither Tristan nor Shelly are impacted by the transfer balance cap or have funds in the accumulation phase, they may still benefit from the reduced minimums. If during 2022/23 they each draw $45,000 ($1,000,000 x 4.5%) from their pension as a pension payment and $55,000 as a lump sum, this results in a $55,000 debit to their personal transfer balance account.
Upon the death of either Tristan or Shelly, this strategy would decrease the amount of the surviving spouse’s personal transfer balance cap account by $55,000. As a result, the surviving spouse could retain $55,000 more in pension phase than had they have received the entire $100,000 as pension payments.
7. Other superannuation changes
On 1 July 2022, various other superannuation caps and thresholds have been indexed as summarised in the table below.
| Cap/Threshold | 2021/22 |
2022/23 |
|---|---|---|
| Small business CGT cap (15 year exemption) | $1,615,000 | $1,650,000 |
| Low rate cap amount (lump sum withdrawals between preservation age and age 60) | $225,000 | $230,000 |
| Untaxed plan cap amount | $1,615,000 | $1,650,000 |
| Maximum contribution/earnings base (for Superannuation guarantee) | $58,920 | $60,220 |
| Co-contribution income thresholds | Lower:- $41,112 Upper:- $56,112 |
Lower:- $42,016 Upper:- $57,016 |
The following superannuation caps and thresholds have not been indexed and are the same for 2021/22 and 2022/23.
| Cap/Threshold | 2021/22 and 2022/23 |
|---|---|
| Standard concessional cap | $27,500 |
| Standard non-concessional cap | $110,000 |
| Non-concessional cap based on total superannuation balance (TSB) eligibility criterion | If TSB as 30 June of then previous financial year is:- · <1,480,000 – then $330,000 · Between $1,480,000 and $1,589,999 – then $220,000 · Between $1,590,000 and $1,699,999 – then $110,000 · ≥ $1,700,000 – then nil |
| Maximum downsizer contribution | Lesser of $300,000 and the amount of the eligible sale proceeds |
| Small business CGT retirement exemption | Lesser of $500,000 and the disregarded gain |
| Disregarded small fund assets (relevant for certain SMSF administrative matters) | TSB <$1,600,000 (as at 30 June of the previous financial year) |
| Eligibility to use carry forward concessional contributions | TSB <$500,000 (as at 30 June of the previous financial year) |
| Eligibility to use the work test exemption | TSB <$300,000 (as at 30 June of the previous financial year) |
| Spouse contribution tax offset | Lower income threshold:- $37,000 Upper income threshold:- $40,000 |
| Low income super tax offset | $37,000 |
| Division 293 (additional 15% tax applied to concessional contributions) | $250,000 |
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