Access to the super home downsizer contribution scheme will be extended to younger people next year, as part of a range of retirement savings measures introduced in this year’s federal budget.
First introduced in the 2018–19 financial year, the downsizer measure has allowed individuals 65 years and older to add up to $300,000 and couples up to $600,000, into their super from the proceeds sale of their home.
Data from the Australian Tax Office shows that, as of 30 April 2021, just over 23,000 older Australians had collectively made $5.46 billion in downsizer contributions to their super fund.
From 1 July 2022 the minimum age limit for participation will be reduced to 60, which will open the superannuation door for more people wanting to build up their superannuation account balance.
People considering super home downsizing – especially those already receiving a partial or full government Age Pension – should seek specialist advice as there are specific criteria to qualify.
The budget also brings welcome news for those members trapped in an income stream started before 2007 to manage the old reasonable benefit limits or improve Centrelink entitlements.
You may finally be able to get out of it. You will have two years – starting from the first financial year after it becomes law – to exit your market-linked income stream (commonly known as a term allocated pension), complying lifetime or life-expectancy pension.
However, this does not include lifetime income streams from APRA-regulated and public sector defined benefit schemes.
You can exit your income stream by fully commuting it and transferring the underlying capital – including any reserve supporting it – back to accumulation phase.
From there you can start a new income stream, withdraw it as a lump sum benefit, or retain the funds in the accumulation account.
Pension drawdown rate to remain halved for next year
The minimum self-funded pension drawdown rate will remain halved for another 12 months to 30 June 2022, which was due to finish at the end of the month.
The 50 per cent reduction in the minimum pension drawdown rate, from 5 per cent to 2.5 per cent, was first announced by the government in March 2020 as part of a wider set of Covid-19 relief measures that also included early access to superannuation and a reduction in deeming rates.
Super work test repealed
If you want to contribute to super once you have reached 67, currently you must first meet a “work test” – 40 hours of gainful employment in 30 consecutive days.
A work test exemption (WTE) allows you to contribute where you met the work test in the previous financial year and ended that year with a low super balance.
From 1 July, 2022, you will no longer be required to meet the work test or WTE to make voluntary after-tax non-concessional contributions and/or salary-sacrifice contributions if you are under 75.
In addition, the non-concessional contribution bring-forward arrangement will be available provided you meet the eligibility criteria.
However, you will only need to meet the work test – if you wish to claim a tax deduction for a personal super contribution.
This new budget proposal will make getting money into the superannuation system easier. Anyone under 75 may be able to make, or receive, a super contribution.