Super Changes July 1st 2021
Time is certainly flying by this year, can you believe we’re now past the halfway mark! 2021 is certainly going by quickly and with the end of the Financial Year now behind us, we thought we’d turn your attention to the new Financial Year and most importantly some changes to Super that you should be aware of and leverage as best you can.
Changes to the Super Caps:
The caps on the amount of contributions you can make into Super have now increased which gives you the ability to put more money away for your Retirement. The Concessional (pre-tax) Contribution cap increased from $25,000 to $27,500, and the Non-Concessional (after-tax) cap increased from $100,000 to $110,000. Under the Non-Concessional cap, you can also use the “Bring-Forward” rule, which means you can bring forward the following 2 financial year caps and make $330,000 in one year, instead of the previous $300,000.
If you have a Salary Sacrifice arrangement in place with your employer, you may want to review it and where possible increase it up to the new caps. However, you need to be mindful that the amount your employer has to contribute is also increasing.
Changes to Super Guarantee:
Every employee receives Super contributions from their Employer, from the 1st of July 2021, the rate increased from 9.5% to 10%, which is great as it puts more money away into your retirement nest egg. For those who were receiving contributions up to or close to the previous $25,000 cap, you may now have some room to make extra contributions and get a nice tax deduction.
Changes to Pension Drawdown Rates:
For those enjoying the benefits of being in the tax-free pension phase, you must take at least a minimum pension each year. In response to the COVID-19 pandemic, the Federal Government announced a reduction in the pension minimum rates for both the FY20 and FY21 financial years and has now extended that to include this Financial Year.
| Age | Normal Minimum Pension (%) | Reduced Minimum Pension (%) |
| Under 65 | 4% | 2% |
| 65 to 74 | 5% | 2.5% |
| 75 – 79 | 6% | 3% |
| 80-84 | 7% | 3.5% |
| 85-89 | 9% | 4.5% |
| 90-94 | 11% | 5.5% |
| 95 or over | 14% | 7% |
Changes to the Transfer Balance Cap:
The amount you can transfer into the tax-free pension phase referred to as the “Transfer Balance Cap” has also increased. Previously you could only transfer up to $1.6M, from 1 July this new cap is $1.7M. Unfortunately, for those who have already used up the $1.6M you are unable to increase the amount. Those who have transferred part of your Super into Pension will benefit from the increased cap but at a reduced amount, worked out as a percentage of the cap already used.
Let’s take for example Mary, in the Financial Year 2021 Mary ceased work and put $800,000 into an Account-Based Pension, that is used up 50% of her Transfer Balance Cap. From 1 July, her cap indexes by 50% of the increased amount. As the cap has increased by $100,000, Mary’s increase is $50,000. Therefore her new Transfer Balance Cap is $1.65M.
There are lots to take in around the changes to Super with the amount you can contribute and changes to pensions. It’s always handy to have an Adviser that can help you navigate all the changes, reach out to JBS Financial for help to discuss how these changes may affect you.
Peter Folk – Financial Adviser