Information for advisers only.
A raft of changes to superannuation rates, caps and thresholds have come into effect from 1 July 2021.
Concessional contributions are contributions made to a client’s super fund on a before tax basis. Concessional contributions include superannuation guarantee, salary sacrifice and personal contributions which are claimed as a tax deduction.
The 2021/22 standard concessional cap has increased to $27,500 (from $25,000 in 2020/21).
From 1 July 2021:
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 2021.
During 2021/22 he will earn taxable income of $150,000 as a sole trader.
Since 1 July 2018, Adrian has made the following concessional contributions
Adrian’s 2021/22 concessional cap is $43,500. This consists of the $27,500 standard concessional cap for 2021/22, plus $5,000 (unused amount from 2018/19), plus $10,000 (unused amount from 2019/20), plus $1,000 (unused amount from 2020/21).
The SG rate is the minimum percentage of an employed client’s ordinary time earnings their employer must pay to their super.
The 2021/22 superannuation guarantee rate has increased to 10% (from 9.5% in 2020/21).
From 1 July 2021:
The ECCC is a penalty which applies to the tax a client pays when their excess concessional contributions are included in their assessable income.
The ECCC has been abolished from 1 July 2021.
Aside from the removal of the ECCC, there is no change to the treatment of excess concessional contributions, including:
Non-concessional contributions are contributions made to a client’s super fund on an after tax basis. Non-concessional contributions include personal contributions not claimed as a tax deduction, and spouse contributions.
The 2021/22 standard non-concessional cap has increased to $110,000 (from $100,000 in 2020/21). As a result, the 2021/22 non-concessional cap using the three year bring forward provision has increased to $330,000 (from $300,000 in 2020/21).
The TSB eligibility criterion to make non-concessional contributions has also changed, as summarised in the below table.
If eligible to trigger the bring forward during 2021/22 and other eligibility criteria4 are satisfied.
|If TSB @ 30 June 2021||Max NCC|
|$1,480,000 - $1,589,999||$220,000|
|$1,590,000 - $1,699,999||$110,000|
If a client triggered the non-concessional bring forward by making non-concessional contributions of more than $100,000 during either 2019/20 or 2020/21, different rules will apply as illustrated in example 3.
Betty (age 63) is retired and had a TSB as at 30 June 2021 of $1,000,000. During 2021/22, she wants to make personal non-concessional contributions.
Betty has previously made the following non-concessional contributions:
Betty can make non-concessional contributions without regard to the work test or work test exemption as she will be under age 67 at the time of the non-concessional contribution. Also, as she is under age 67 as at 1 July 2021, she is eligible to use the bring forward provision.
Betty is eligible to make non-concessional contributions of up to $330,000 during 2021/22. This is because she did not trigger the bring forward provision during either 2019/20 or 2020/21 and her TSB as at 30 June 2021 is <$1,480,000.
Cameron (age 60) is retired and had a TSB of $1,300,000 as at 30 June 2019, and a TSB as at 30 June 2021 of $1,450,000. During 2021/22, he wants to make personal non-concessional contributions.
Cameron has previously made the following non-concessional contributions:
Cameron can make non-concessional contributions without regard to the work test or work test exemption as he will be under age 67 at the time of the non-concessional contribution. However he cannot trigger the bring forward during 2021/22 as he has already done so during 2019/20.
Cameron is eligible to make non-concessional contributions of up to $199,000 during 2021/22. This is because:-
Irrespective of his 2021/22 non-concessional contributions, subject to the other criteria Cameron will start the 2022/23 financial year with a ‘fresh slate’. This is because the 2019/20, 2020/21, 2021/22 three year bring forward period will have expired on 1 July 2022.
The transfer balance cap limits the amount of superannuation funds which can be transferred to retirement phase income streams, (most commonly account based pensions (ABP).
The 2021/22 general transfer balance cap has increased to $1,700,000 (from $1,600,000 in 2020/21).
Whilst the general transfer balance cap has increased on 1 July 2021, a client’s personal transfer balance cap will only increase in proportion to their used personal TBC based on their highest ever personal TBC balance between 1 July 2017 and 30 June 2021.
As a result, clients will have their own personal transfer balance cap which will depend on their personal transfer balance cap history.
From 1 July 2021, for TBC purposes there are three main categories of clients.
Debra (age 60) purchased a ABP (ABP #1) on 20 April 2019 with a purchase price of $1,200,000. This is her only transfer balance cap event between 1 July 2017 and 30 June 2021. She also has $1,000,000 in the accumulation phase of super.
On 29 July 2021, she wants to use her funds in the accumulation phase of super to commence another ABP (ABP #2) which fully utilises but does not exceed her personal TBC.
To do so, Debra uses $425,000 of her superannuation accumulation to purchase ABP #2.
To determine this figure, Deborah first calculated her personal TBC 7. As between 1 July 2017 and 30 June 2021 Debra’s highest ever personal TBC balance is $1,200,000, she has used 75% of her TBC and therefore has 25% remaining. Of the $100,000 general TBC increase, Debra’s personal TBC increases by $25,000 ($100,000 x 25%).
Therefore Debra’s personal TBC as at 1 July 2021 is $1,625,000 ($1,600,000 previous general TBC plus $25,000 increase).
Debra’s $1,625,000 personal TBC minus the $1,200,000 credit event from ABP # 1 = $425,000.
As the TBC is events based, Debra does not need to consider the balance of ABP #1 when commencing ABP #2.
A client’s preservation age is relevant for various superannuation matters.
Clients with a date of birth between 1 July 1963 and 30 June 1964 (inclusive) have a preservation age of 59.
This means that (unlike 2020/21), if a client attains age 58 during 2021/22, they will not have attained their preservation age.
Only clients who have attained their preservation age are able to:
From 1 July 2021, various other superannuation caps and thresholds have been indexed as summarised in the table below.
|Small business CGT cap (15 year exemption)||$1,565,000||$1,615,000|
|Low rate cap amount (lump sum withdrawals between preservation age and age 60)||$215,000||$225,000|
|Untaxed plan cap amount||$1,565,000||$1,615,000|
|Maximum earnings base (for Superannuation guarantee)||$57,090||$58,920|
|Co-contribution income thresholds||Lower:- $39,837
The following superannuation caps and thresholds have not been indexed and are the same for 2020/21 and 2021/22.
|Cap/Threshold||2020/21 and 2021/22|
|Maximum downsizer contribution||Lesser of $300,000 and the amount of the eligible sale proceeds|
|Small business GCT retirement exemption||$500,000|
|Disregarded small fund assets||<$1,600,000 (as at 30 June of the previous financial year)|
|Eligibility to use carry forward concessional contributions||<$500,000 (as at 30 June of the previous financial year)|
|Eligibility to use the work test exemption||<$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 on concessional contributions)||$250,000|
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.
· Satisfy the contribution standards i.e. at the time of the contribution, 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, and the standard concessional cap for 2021/22 is $27,500. ($25,000 x 3) + $27,500] = $102,500.
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.
4. In addition to the TSB eligibility criterion, to be eligible to receive non-concessional contributions, a client must have satisfied the contribution standards i.e. at the time of the contribution the client is under age 67, or age 67-75 and satisfies the work test or work test exemption.
5. This was the TSB to contribute the full $300,000 bring forward during 2019/20 i.e. the year in which he triggered the bring forward. If Cameron’s TSB as at 30 June 2019 was between $1,400,000 and $1,499,999, he would be able to contribute up to $330,000 during 2021/22 as he would have only triggered a two year bring-forward which would have expired on 1 July 2021.
6. If the bring forward was triggered but not fully utilised, non-concessional contributions during the following two financial years are subject to having a TSB as at 30 June of the previous financial year of less than the standard transfer balance cap ($1,700,000 for 2021/22).
7. In Debra’s example, her highest ever personal TBC balance is the same as her TSB balance as at 30 June 2021. However this will not be the case for clients who between 1 July 2017 and 30 June 2021 have had a TBC debit event such as a lump sum commutation from an ABP or rolling an ABP to the accumulation phase.
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FOR ADVISERS USE ONLY
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