A new financial year can bring about change. For example, it’s not uncommon for change to occur with regards to existing rates and thresholds (increases or decreases), as well as change in terms of new legislation taking effect.
Notably, these changes (and others) have the potential to impact your financial situation, goals and objectives. Therefore, it’s vital to assess the relevance and impact of these changes—and navigate accordingly.
Below is important information on several key changes occurring from 1 July 2021 in relation to superannuation, taxation, and social security entitlements (the Age Pension, for example).
Superannuation
Contributions caps limits
From 1 July 2021:
For more information on the contributions caps, please click here.
Contributions eligibility age
From 1 July 2020 onwards, subject to meeting other eligibility criteria, individuals under 67 years of age (previously 65) may access the bring-forward non-concessional contributions cap in a particular financial year.
Please note: This relates to the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020, which, although only recently passed through parliament, has a backdated commencement date of 1 July 2020.
For more information on the bring-forward rule, please click here.
COVID-19 re-contributions
From 1 July 2021, individuals who received a COVID-19 early release of super amount may re-contribute up to the total amount they received without the contributions counting towards their non-concessional contributions cap, however these contributions can’t be claimed as a personal super deduction.
For more information on the COVID-19 early release of super, please click here.
Excess contributions charge
From 1 July 2021, individuals who exceed their excess concessional contributions cap will no longer be liable to pay the excess contributions charge.
For more information on exceeding the concessional contributions cap, please click here.
Government co-contribution thresholds
From 1 July 2021, the lower and higher income thresholds for the Government co-contribution are $41,112 (previously $39,837) and $56,112 (previously $54,837), respectively.
The maximum Government co-contribution remains at $500 (reduces by 3.333 cents for each $1 of income earned over $41,112, and cuts out when an individual’s income reaches $56,112).
For more information on the Government co-contribution, please click here.
Maximum super contribution base
From 1 July 2021, the maximum super contribution base is $58,920 per quarter (previously $57,090), which equates to approximately $5,892 Super Guarantee per quarter (approximately $23,568 Super Guarantee annualised).
For more information on the maximum super contribution base, please click here.
Minimum annual pension payment requirement
From 1 July 2021, the Government’s temporary 50% reduction in the minimum annual pension payment requirement for retirement income streams continues from the previous financial year.
For more information on the minimum annual pension payment, please click here.
Low-rate cap amount and untaxed-plan cap amount
From 1 July 2021, the low-rate cap amount [i.e. the amount of taxable components (taxed and untaxed elements) of a super lump sum that can be received at a lower (or nil) rate of tax] is $225,000 (previously $215,000). Please note: The low-rate cap amount is reduced by any amount previously applied to the low-rate threshold.
Also, the untaxed-plan cap amount is $1,615,000 (previously $1,565,000).
For more information on the low-rate cap amount, please click here.
Self-managed super fund (SMSF) membership limit
From 1 July 2021, the maximum allowable number of members in an SMSF is six (previously four).
For more information on SMSFs, please click here.
Super Guarantee contribution rate
From 1 July 2021, the Super Guarantee contribution rate is 10% (previously 9.5%) of an employee’s earnings (ordinary time earnings base) up to the maximum super contribution base.
For more information on the Super Guarantee, please click here.
Transfer balance cap limit
From 1 July 2021, the general transfer balance cap (TBC) is $1.7 million (previously $1.6 million). However, in terms of the personal TBC, it’s important to note that if an individual had a transfer balance account before 1 July 2021, their personal TBC would be either:
For more information on the transfer balance cap, please click here.
Your Future, Your Super legislation
From 1 July 2021, several key legislative changes take effect regarding MySuper products and trustees (and directors of a corporate trustee)—performance testing of MySuper products, and introduction of the best financial interests duty. Also, from 1 November 2021, the ‘stapling’ of super funds takes effect.
For more information on the Your Future, Your Super legislation, please click here.
Taxation
Base-rate entity company tax rate
From 1 July 2021, the company tax rate for base-rate entities (aggregated turnover of less than $50 million, and 80% or less of assessable income is base-rate entity passive income) is 25% (previously 26%).
Please note: The company tax rate for all other companies remains at 30%.
For more information on company tax rates, please click here.
Low and middle-income tax offset
From 1 July 2021, the low- and middle-income tax offset continues from the previous financial years—extended for an additional financial year, to the 2021-22 financial year.
For more information on the low and middle-income tax offset, please click here.
Study & training loan repayment thresholds & rates
From 1 July 2021, there are new study and training loan repayment income thresholds and rates (see below).
| Study & training loan repayment: Thresholds & rates | |||
| Repayment income | Repayment rate | Repayment income | Repayment rate |
| < $47,014 | Nil | $86,519 to $91,709 | 6.00% |
| $47,014 to $54,282 | 1.00% | $91,710 to $97,212 | 6.50% |
| $54,283 to $57,538 | 2.00% | $97,213 to $103,045 | 7.00% |
| $57,539 to $60,991 | 2.50% | $103,046 to $109,227 | 7.50% |
| $60,992 to $64,651 | 3.00% | $109,228 to $115,781 | 8.00% |
| $64,652 to $68,529 | 3.50% | $115,782 to $122,728 | 8.50% |
| $68,530 to $72,641 | 4.00% | $122,729 to $130,092 | 9.00% |
| $72,642 to $77,001 | 4.50% | $130,093 to $137,897 | 9.50% |
| $77,002 to $81,620 | 5.00% | $137,898 and above | 10.00% |
| $81,621 to $86,518 | 5.50% | ||
Also, the indexation rate applied to a study and training loan is CPI and for 2021 was 0.6% (1.8% for 2020). For context, on 1 June each year, indexation is applied to the part of an accumulated study and training loan that has remained unpaid for more than 11 months.
For more information on study and training loan repayment, please click here.
Tax-free part of genuine redundancy payments and early retirement scheme payments
From 1 July 2021, the tax-free part of genuine redundancy payments and early retirement scheme payments is $11,341 (previously $10,989) for the base limit and $5,672 (previously $5,496) for each complete year of service.
For more information on genuine redundancy and early retirement scheme payments, please click here.
Temporary shortcut deduction method for work-related home office expenses
From 1 July 2021, the temporary shortcut deduction method for work-related home office expenses ceases.
For more information on deductions and work-related expenses, please click here.
Unincorporated small business tax offset
From 1 July 2021, the unincorporated small business tax offset for small business entities (aggregated turnover of $5 million) is 16% (previously 13%)—up to a maximum tax offset of $1,000.
For more information on the unincorporated small business tax offset, please click here.
Social security
Age Pension thresholds
From 1 July 2021, there are new income and assets thresholds for the corresponding income test and assets test for the Age Pension (see below).
| Income test for Age Pension: Income thresholds* | ||
| Family Situation | Homeowners & non-homeowners | |
| For full Age Pension (per fortnight)^ | For part Age Pension (per fortnight)# | |
| Single | < $180 (previously $178) | < $2,085.40 (previously $2,083.40) |
| Couple (combined) | < $320 (previously $316) | < $3,192.40 (previously $3,188.40) |
| Illness separated couple (combined) | < $320 (previously $316) | < $4,130.80 (previously $4,126.80) |
*Some assets are deemed to earn income, while there are special rules for other types of income. Furthermore, the Work Bonus may be applicable if you are earning income from employment.
^Income over these amounts reduces the rate of pension payable by 50 cents in the dollar (single), 25 cents in the dollar each (for couples).
#These amounts may be higher if Rent Assistance is paid with your pension.
| Assets test for full Age Pension: Assets thresholds*^ | ||
| Family situation | Homeowners | Non-homeowners |
| Single | < $270,500 (previously $268,000) | < $487,000 (previously $482,500) |
| Couple (combined) | < $405,000 (previously $401,500) | < $621,000 (previously $616,000) |
| Illness separated couple (combined) | < $405,000 (previously $401,500) | < $621,000 (previously $616,000) |
| One partner eligible (combined assets) | < $405,000 (previously $401,500) | < $621,000 (previously $616,000) |
*Some assets are deemed to earn income, while certain assets aren’t included (e.g. generally your principal home is exempt) in the assets test.
^Assets over these amounts reduce pension by $3 per fortnight for every $1,000 above the amount (single and couple combined).
| Assets test for part Age Pension: Assets thresholds*^ | ||
| Family situation | Homeowners | Non-homeowners |
| Single | < $588,250 (previously $585,750) | < $804,750 (previously $800,250) |
| Couple (combined) | < $884,000 (previously $880,500) | < $1,100,500 (previously $1,095,000) |
| Illness separated couple (combined) | < $1,040,500 (previously $1,037,000) | < $1,257,000 (previously $1,251,500) |
| One partner eligible (combined assets) | < $884,000 (previously $880,500) | < $1,100,500 (previously $1,095,000) |
*Some assets are deemed to earn income, while certain assets aren’t included (e.g. generally your principal home is exempt) in the assets test.
^These amounts may be higher if Rent Assistance is paid with your pension.
For more information on the Age Pension income test and assets test, please click here.
Deeming thresholds
From 1 July 2021, the reduction of deeming rates to support income support recipients (inclusive of Age Pensioners) continues to apply. As it stands, the social security deeming rates are:
*A combined threshold of $89,000 (previously $88,000) applies when at least one member of a couple receives a pension, otherwise the threshold is $44,500 (previously $44,000) for each member of a couple.
For more information on the deeming rates, please click here.
Other
First Home Loan Deposit Scheme and Family Home Guarantee property price caps
From 1 July 2021, new property price caps apply for the First Home Loan Deposit Scheme, which also applies to the recently announced Family Home Guarantee (see below).
| First Home Loan Deposit Scheme & Family Home Guarantee: Property price caps | ||
| State/Territory | Capital City & Regional Centres* | Rest of State |
| NSW | $800,000 (previously $700,000) | $600,000 (previously $450,000) |
| VIC | $700,000 (previously $600,000) | $500,000 (previously $375,000) |
| QLD | $600,000 (previously $475,000) | $450,000 (previously $400,000) |
| WA | $500,000 (previously $400,000) | $400,000 (previously $300,000) |
| SA | $500,000 (previously $400,000) | $350,000 (previously $250,000) |
| TAS | $500,000 (previously $400,000) | $400,000 (previously $300,000) |
| ACT | $500,000 (previously $500,000) | – |
| NT | $500,000 (previously $375,000) | – |
| Jervis Bay Territory & Norfolk Island | $550,000 (previously $450,000) | – |
| Christmas Island & Cocos (Keeling) Island | $400,000 (previously $300,000) | – |
*Includes Newcastle and Lake Macquarie, Illawarra, Geelong, Gold Coast, and Sunshine Coast.
Please note: In brief, the Family Home Guarantee aims to support single parents with dependants to enter, or re-enter, the housing market with a 2% deposit (the Government guaranteeing the remaining 18%), regardless of whether that single parent is a first-home buyer or previous owner-occupier.
For more information on the First Home Loan Deposit Scheme, please click here.
Moving forward
A new financial year often brings change and, with it, the potential to impact you, now and in the future. As an example, an increase in the income test and assets test thresholds may change your Age Pension entitlement.
Therefore, it’s vital to take the time to assess the relevance and impact of any change—then plan and act accordingly. If you would like to discuss anything mentioned above and its potential relevance to you, please contact us.