While the 2021/22 Federal Budget’s key focus is on economic recovery post the global pandemic, several measures relating to superannuation were announced. These are mainly changes to existing super measures rather than new proposals.

It’s important to understand that these measures are currently just proposals and legislation would need to be passed for any of these changes to take effect.

Read on for more details about the proposed measures. We’re also hosting a number of Federal Budget webinars to talk through the changes – there’s no additional cost for TelstraSuper members to attend, it’s part of your membership.

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Save more in the First Home Super Savers Scheme (FHSS Scheme)

The First Home Super Savers Scheme – first announced in the 2017/18 Federal Budget – allows first home buyers to use a portion of their voluntary super contributions towards a house deposit. Until now, eligible participants have been able to withdraw up to $30,000 of their extra voluntary contributions from their super towards the deposit, but the government proposes to lift this to $50,000.

Voluntary contributions made from 1 July 2017 up to the existing limit of $15,000 per year will count towards the total amount able to be released.

Expected start date is 1 July 2022.

More people eligible for super with removal of $450 threshold

Under current super rules, employers don’t need to make superannuation guarantee contributions for employees who they pay less than $450 per month. Proposed Federal Budget changes would see this threshold removed and these employees become eligible for employer paid super.

The Retirement Income Review estimated that with this threshold removed, around 300,000 individuals would receive additional superannuation guarantee payments each month, 63 per cent of whom are women.

Expected start date is 1 July 2022.

Eligibility age lowered for downsizer scheme

The downsizer scheme was introduced in the 2017-18 budget and allows eligible people aged 65 and over who sell their primary home to make post-tax (non-concessional) contributions to their super of up to $300,000 per person. Couples can contribute $300,000 each. These contributions do not count towards post-tax contribution caps.

Under the proposed changes, the eligibility age will be lowered to age 60. Other rules governing the scheme will remain unchanged. These include the house having to be owned for at least 10 years.

Expected start date 1 July 2022.

Removal of “work test” for people between 67 and 74

Currently, people aged between 67 and 74 must meet a “work test” before being able to make voluntary contributions to super (both pre-tax and post-tax contributions) or receive contributions from their spouse.

The work test requires a person to be gainfully employed for at least 40 hours over a consecutive 30 day period during the financial year.

This proposal would allow individuals aged 67 to 74 years (inclusive) to make or receive post-tax contributions (including under the bring-forward rule) and salary sacrifice super contributions without meeting the work test, subject to existing contribution caps.

Members would however still have to meet the work test to make personal deductible contributions.

Expected start date 1 July 2022.

Increased funding for the regulator

The government will provide additional funding over four years (starting from 2021-22) to support stronger consumer outcomes for members of super funds. This includes additional funding for the Australian Prudential Regulation Authority (APRA) and Super Consumers Australia. This will be partially paid for by increased levies for financial institutions.

Changes to Pension Loans Scheme

The Pension Loans Scheme (PLS) is a reverse mortgage type loan offered by the Federal Government that allows borrowers of age pension age to receive a tax-free income stream by taking out a loan against the equity in their home. The flexibility of the Pension Loans Scheme is being improved by providing access to advance payments and introducing a No Negative Equity Guarantee.

The proposed increased flexibility from 1 July 2022 will allow participants to access up to two lump sum advances in any 12 month period, up to a total value of 50 per cent of the maximum annual rate of the Age Pension.

No Negative Equity Guarantee will mean that borrowers under the PLS, or their estate, will not have to repay more than the market value of their property, in the rare circumstances where their accrued PLS debt exceeds their property value.

Expected start date is 1 July 2022.

Transfer of super to the Kiwi Super Scheme

The government will provide $11.0 million over four years from 2021-22 (and $1.0 million per year ongoing) to the Australian Taxation Office to administer the transfer of unclaimed superannuation money directly to KiwiSaver accounts (the New Zealand equivalent of Australian superannuation funds).

Expected start date is 1 July 2022.

Legacy product conversions

The government will allow individuals to exit a specified range of legacy retirement products, together with any associated reserves, for a two‑year period. The measure will include market‑linked, life‑expectancy and lifetime products, but not flexi‑pension products or a lifetime product in a large APRA‑regulated or public sector defined benefit scheme.

Importantly, it will not be compulsory for individuals to take part.

Currently, these products can only be converted into another like product and limits apply to the allocation of any associated reserves without counting towards an individual’s contribution caps.

This measure will permit full access to all of these products’ underlying capital, including any reserves, and allow individuals to potentially shift to more contemporary retirement products or take a lump sum benefit.

Expected start date is the first financial year after the enabling legislation receives Royal Assent.

Previous measures from the 2020/21 Budget

With the 2020/21 Federal Budget delivered later in the year due to the global pandemic, there are several budget measures related to super that are yet to be legislated. These include:

New tool to compare super funds

For those entering the workforce for the first time or wanting to review their superannuation, a new online “YourSuper” comparison tool will be built that allows members to compare and select a superannuation product that meets their needs. The YourSuper tool will provide a table of MySuper products ranked by fees and investment returns. It will also show your current super accounts.

Changes to the way default superannuation works

Proposed changes to the default super system could mean that once you open a superannuation account, it will follow you to a new job unless you choose otherwise.

This means that your employer will pay your super to your existing super fund if you have one, unless you select another fund. The change is aimed at stopping the creation of unintended multiple super accounts.

Superannuation performance test introduced

Super funds could have to meet an annual performance test conducted by the Australian Prudential Regulation Authority. Funds that fail the test will have to notify members of their underperformance.

If a fund underperforms over two consecutive years, it won’t be able to accept new members until its performance improves.

The funding for this initiative will be paid for through increased levies on regulated financial institutions.

Strengthened obligations for super trustees

The government is raising the standard of super funds by strengthening obligations on super fund trustees to ensure their actions are in the best financial interests of members.

This includes providing members with key information about how they manage and spend members’ money in advance of the Annual Members’ Meeting.

Reminder of other key measures coming to affect from 1 July 2021*:

• Concessional (pre-tax) contribution cap will increase to $27,500 per financial year
• Non-concessional (post-tax) contribution cap will increase to $110,000 per financial year
• Three years’ worth of the non-concessional (post-tax) annual cap under the bring-forward rules (eligible members only) will increase to $330,000
• Total super balance cap will increase from $1.6 million to $1.7 million
• The general transfer balance cap will increase from $1.6 to $1.7 million. Every individual will have their own personal transfer balance cap of between $1.6 and $1.7 million – depending on their circumstances
• The maximum government superannuation co-contribution entitlement remains at $500, however the lower-income threshold increases to $41,112 and the higher-income threshold increases to $56,112.

*For summary purposes only. The rules are complex and different caps may apply, depending on your personal circumstances. Eligibility criteria also apply. For full details, please visit the ATO website www.ato.gov.au.