The start of a new financial year is a good time to check in on new legislation, thresholds, and rates you may need to be aware of when thinking about your finances.
Below we cover some key super, tax, and social security changes for the 2022-23 financial year, and some of the measures that are staying the same.
Updates on super
The super guarantee contribution rate has increased from 10 to 10.5%. Anyone who is eligible to receive the super guarantee, will receive the increased amount from 1 July 2022. Alongside this, the maximum super contribution base has also increased to $60,220 per quarter (previously $58,920). Meaning, if you earn over this limit in a particular quarter, your employer is not required to make super guarantee contributions for any earnings above this limit.
In a move to ensure more Australians benefit from super, the $450 monthly income threshold for super guarantee contributions has been removed. Anyone earning less than $450 per month (before tax), is now entitled to receive super guarantee contributions from their employer. These contributions will be at the new rate of 10.5%. The only exception now being under 18s who work less than 30 hours per week.
The minimum eligible age to make a downsizer contribution has reduced from 65 to 60. From 1 July 2022, those aged 60 and over may be able to use the proceeds from the sale of their home to make a non-tax-deductible contribution of up to $300,000 each (or up to $600,000 per couple) into super—boosting their savings for retirement. To be eligible for the downsizer contribution, you will need to satisfy the full list of eligibility criteria.
The work test rules for older Australians have been changed to provide more flexibility in saving for retirement through super. From 1 July 2022, those aged between 67 and 74 are able to make or receive non-concessional or salary sacrifice contributions without meeting the work test, subject to existing contributions caps. This does not apply to personal deductible contributions. In addition, the bring-forward arrangements, allowing individuals to contribute up to $330,000 of non-concessional contributions in a financial year, have been extended to those aged 67 to 74.
The Government has increased the amount of super that may be released under the First Home Super Saver (FHSS) scheme. The scheme is designed to help individuals save money for a first home inside of super. From 1 July 2022, the amount of eligible contributions that can count towards the maximum releasable amount across all years increased from $30,000 to $50,000 (a maximum of $15,000 for each financial year).
The Government’s temporary 50 per cent reduction in the minimum annual pension payment requirement for certain retirement income streams continues for a fourth year from 1 July 2022. The 50 per cent reduction applies to the minimum annual payment calculated by the super or annuity provider. The same rules apply to pension withdrawals from a Self Managed Super Fund (SMSF).
The income threshold for super co-contributions has increased. As of 1 July 2022, the lower income threshold is $42,016 (previously $41,112) and higher income threshold is $57,016 (previously $56,112). The maximum annual entitlement remains at $500.
The low-rate cap amount has increased to $230,000 (previously $225,000). This is the maximum amount of super lump sum (taxed and untaxed elements) that can be received at a lower (or nil) rate of tax. This cap applies to those under age 60 who have reached their preservation age. Please note that the low-rate cap amount is reduced by any amount previously applied to the low-rate cap.
The CGT lifetime cap amount has increased to $1,650,000 (previously $1,615,000). This is a lifetime cap on contributions sourced from the retirement or 15-year small business capital gains tax concessions and is excluded from the non-concessional cap.
Staying the same for the 2022-23 financial year:
The annual concessional contributions cap remains at $27,500 for the 2022-23 financial year. However, those with a total superannuation balance below $500,000 may be eligible to carry forward unused concessional caps from previous financial years. Concessional contributions include your employer contributions (including salary sacrifice contributions) and any personal contributions you claim as a tax deduction.
The annual non-concessional contributions cap remains at $110,000, although it may be possible to ‘bring-forward’ up to two further years of non-concessional contributions to a maximum of $330,000 in a single year.
The general Transfer Balance Cap (TBC) remains at $1.7 million for this financial year. This is the lifetime limit on the total amount of super that can be transferred into retirement phase income streams, including most pensions and annuities. For transfer balance accounts held before 1 July 2021, the personal transfer balance cap will be calculated proportionally, based on their highest previous transfer balance account.
Updates on tax
The low- and middle-income tax offset (LMITO) is scheduled to end in the 2022-23 financial year. The LMITO for the 2021-22 income year (up to $1,500 for individuals and $3,000 for couples) will be paid from 1 July 2022 upon tax return submission.
From 1 July 2022, the compulsory HECS-HELP repayment threshold increased to $48,361. Anyone earning less than this amount will not have to repay their loan until they exceed the new threshold amount.
Updates on social security
Centrelink deeming rates used to calculate income generated from financial assets remain unchanged for 2022-23, however the deeming thresholds will increase. The lower deeming rate is 0.25%, and applicable to the first $56,400 (increased from $53,600) of financial assets for a single person (or the first $93,600, increased from $89,000 for a couple*). The upper deeming rate is 2.25%, and applicable to financial assets in excess of $56,400 (or in excess of $93,600, for a couple*).
*A combined threshold of $93,600 applies when at least one member of a couple receives a pension, otherwise the threshold is $46,800 for each member of a couple.
The fortnightly withdrawal amounts for the Home Equity Access Scheme (previously known as the Pension Loans Scheme) remain unchanged. However, you can now request to receive a portion of your fortnightly loan payments as a lump sum. This is capped at 50% of your annual maximum pension rate. Any lump sum you receive will reduce the fortnightly loan payments you can receive over the following 26 fortnights.
The above is a summary of key updates, not an exhaustive list, therefore, prior to making any changes to your financial situation, it is important to consider how appropriate these measures may be for you. If you would like to discuss any of the above, please get in touch with us.