In line with existing legislation, a number of superannuation changes are coming into effect that will apply to both employees and employers.
The two specific changes that will affect employees the most include:
- The rate of super guarantee contributions from employers will increase to 10.5%
- The $450 eligibility threshold for super will be removed
Let’s find out what this means for your future retirement savings.
Super guarantee lifts to 10.5%
From the new financial year, the super guarantee (SG) rate will increase from 10% to 10.5% for employees.
For employees on award wages or enterprise agreements, superannuation is paid on top of their wage. So if an employee who is paid $90,000 plus super is currently receiving $9,000 into their super contributions, under the new rate rise they will be paid $9,450.
However, for employees on contracts who receive super as part of their salary, the extra 0.5% will be taken from their salary meaning their annual wage will decrease.
Josh van Gestel, Australian Retirement Trust Education Manager, explained the importance of considering how your employer will fund this new rate increase.
“Some employers may pay this additional amount on top of other salary increases or bonuses they may provide to you, while some other employers may instead pay for this increase in SG by reducing your current salary or any future salary increases or bonuses they would have otherwise paid to you,” Mr van Gestel told Savings.com.au.
“If you’re also making personal pre-tax contributions to your super, including salary sacrifice contributions or amounts you claim as a tax deduction, just make sure the increase in what your employer pays doesn’t tip you over the annual concessional limit of $27,500 that applies to how much you can contribute each year.”
This isn’t the last expected SG rate rise we will see as the Federal Government has mandated a 0.5% rate increase every financial year until it reaches 12% in 2025.
More employees eligible for super as the $450 threshold is ditched
The $450 threshold for super is also going to be scrapped.
For the first time from 1 July, it is estimated more than 300,000 Aussies (mostly young) will be eligible to receive super guarantee payments. This means many low-income workers with part-time or casual jobs will now be entitled to the same benefits as their highr-earning counterparts.
Under the new changes, anyone earning less $450 per month before tax will receive the new 10.5% contribution regardless of how little they earn. The one exception is if the employee is under 18 years of age, they must work for at least 30 hours per week to be eligible for super payments.
How to get started if you’ve never received super before
Those Aussies who are new to superannuation are recommended to do some research and find a super fund that best suits their needs now and in the long run. After all, you want to ensure the fund you entrust with your savings ticks all the relevant boxes.
“You want to remember that a super fund could potentially be looking after your savings for decades until you retire, as well as during your retirement,” Mr van Gestel said.
There are three key things to weigh up when selecting the right fund for you.
1. Take a look at the tangible numbers such as fees and costs
“Make sure that you compare the fees and costs, remembering that these are deducted from your account balance and can deplete your savings over time,” Mr van Gestel said.
“Consider the investment performance of the fund – not just over the last few years or months, but over the long-term.
“Then there is insurance, make sure you are getting the cover you need, that many of us only have inside our super account, but that it is at a reasonable cost you can justify.
"Insurance is something you hope to never have to use, but it’s important you are comfortable with the peace of mind it gives you.”
2. Consider the services and benefits on offer
You want to make the most of your membership.
“See what online access and functionality you get, including through mobile apps, what rewards and discounts might membership get you access to, and what support can you receive,” Mr van Gestel said.
3. Think about what type of fund you’re after
“Consider if the fund you’re with or looking to join is a profit-for-members fund, a retail fund that may be offered through a bank or other financial institution or are you considering doing it all yourself through a self-managed superannuation fund,” Mr van Gestel said.
“Know who your fund is and what makes them tick.”
Work test requirements for older Australians scrapped
Older Australians aged between 67-74 will be able to top up their super without having to undergo a work test, provided their super balance is less than $1.7 million in July 2022.
This change allows older super members to continue to build their retirement balances.
“Prior to 1 July 2022 any person over the age of 67 was required to work at least 40 hours in a 30-day period prior to making any form of personal contribution to their superannuation,” Mr van Gestel explained.
“This includes personal contributions, contributions made by a spouse, salary sacrifice contributions they make through their employer, or personal contributions that they make that they then claim as a tax deduction in their income tax return.
"From 1 July 2022 the work-test will only continue to apply to personal contributions that the individual intends to claim as a tax deduction.”
Cut off age for non-concessional contributions rises
Older super members who wish to make non-concessional contributions into their super account is increasing from 67 to 75 years of age.
This means that people aged up to 74 can make a considerable contribution into their account - $110,000 per year or $330,000 over three years. One important thing to remember is that this only qualifies for those members who have less than $1.48 million in their super.
Buying your first home with super
If you’re thinking about using your super savings to buy your first home, there are important changes occurring from 1 July 2022.
“Individuals can make personal contributions of up to $15,000 a year into their super, up to an overall maximum of $50,000 that they can later withdraw to put towards the purchase of their first home,” Mr van Gestel said.
“This is an increase from an overall maximum of $30,000, which applied prior to 30 June 2022.”
By saving through super, you can actually save on tax which you can put towards your dream home.
New financial year resolutions you should make
As we head into the unknown (we mean the new financial year), it might be time to do a quick stocktake on your super to see how it’s tracking and whether any relevant changes need to be made.
Mr van Gestel highly recommends undertaking the following tasks:
- Engage with your fund - get your online access sorted
- Consider whether you should bring your super funds together (if you have more than one)
- Check your investments - your super is an investment so make sure it’s performing as it should be
- Consider adding personal contributions if you can
- Make sure your insurance and beneficiary nominations are correct
- Reach out to your super fund if you ever need assistance or guidance
Read More: How are young Australians’ super balances faring in the wake of COVID?
Advertisement
Looking to take control of your retirement? This table below features SMSF loans with some of the most competitive interest rates on the market.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.99% p.a. | 7.00% p.a. | $2,659 | Principal & Interest | Variable | $0 | $230 | 70% | Featured |
| |||||||||
7.24% p.a. | 7.25% p.a. | $2,726 | Principal & Interest | Variable | $0 | $0 | 70% | |||||||||||
7.25% p.a. | 7.65% p.a. | $2,729 | Principal & Interest | Variable | $30 | $1,190 | 80% | |||||||||||
7.55% p.a. | 7.94% p.a. | $2,811 | Principal & Interest | Variable | $395 | $1,920 | 80% | |||||||||||
7.75% p.a. | 7.83% p.a. | $2,866 | Principal & Interest | Variable | $0 | $995 | 80% | |||||||||||
7.49% p.a. | 7.50% p.a. | $2,794 | Principal & Interest | Variable | $0 | $230 | 80% | Featured |
|
Image by Joslyn Pickens via Pexels
Ready, Set, Buy!
Learn everything you need to know about buying property – from choosing the right property and home loan, to the purchasing process, tips to save money and more!
With bonus Q&A sheet and Crossword!
Emma Duffy
Harrison Astbury
Rachel Horan
