On 1 July 2022, changes to superannuation rules came into effect to provide more flexibility to Australians in their 60s and 70s. With further changes announced in the Federal Government budget in October 2022, we bring you the latest on these changes and how you can make the most of them.
Learn more about changes announced in the 2022 Federal Budget
From 1 January 2023 the lower age limit for making a downsizer contribution into super reduced from 60 to 55, with no upper age limit. This gives you more flexibility to top up your money in super and potentially benefit from compounding returns to give you more money to live on when you retire.
Downsizer contributions allow you to make a one-off payment into super from the sale of your residential property, provided it has been your (or your spouses) main residence at some point in time. It’s important to note that you won’t be able to make the contribution to your SASS account^. You will need to open an account with another super fund and make the downsizer contribution to that fund.
You can contribute up to $300,000 per individual (a total of $600,000 for a couple) into super from the proceeds of sale from your home. When you make this payment, it won’t count towards your contribution caps and isn't impacted by total super balance contribution restrictions, but it will be included in your transfer balance cap (the total amount of super you can transfer into a tax-free retirement account).
It’s important to note that there is no special Centrelink asset test exemption, so downsizing your home may have an impact on your age pension eligibility.
Before 1 July 2022, if you were aged between 67 and 74 years old and making or receiving voluntary contributions* into your super you would have had to meet the work test. Under the work test you must work at least 40 hours over a 30-day period in the relevant financial year to be allowed to make personal contributions into super.
From 1 July 2022, the work test will no longer apply for anyone making super contributions up until 28 days following the end of the month in which they turn age 75 – except when claiming a personal super contribution deduction, which will still be subject to the work test. Your personal contributions – both concessional and non-concessional must stay within contributions cap limits for the financial year.
Find out more about changes to the work test.
When you sell your residential home in retirement this can have an impact on your eligibility for the age pension. Under current legislation, the proceeds of sale of a principal home are exempt from the pension asset test for 12 months. To give pensioners more time to buy, build or renovate a new home before their pension is impacted, the government is extending this exemption period to 24 months.
Changes will also be made to the treatment of home sale proceeds for the income test. The lower deeming rate (0.25 per cent) will be applied to principal home sale proceeds when calculating deemed income for 24 months after the sale of the principal home.
In the Federal Budget, the government also announced a change in eligibility for the Commonwealth Seniors Health Card. From 4 November 2022 the income threshold for card holders will increase from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.
When you’re earning income from assets – like an investment property or shares for example – this is included in the income test that helps to determine whether you’re eligible to receive a full or part Age Pension. Deeming rates will be applied to assess the level of income for this test regardless of how much income you actually earn from your assets.
In August 2022, the federal government announced that deeming rates will stay the same until 30 June 2024. The lower deeming rate will remain frozen at 0.25 per cent and the upper rate will stay at 2.25 per cent.
From 1 July 2022, the lower deeming rate applies to financial investments up to the threshold of $56,400 for singles and $93,600 for couples. The upper deeming rate applies for financial assets above these thresholds.
Find out more about deeming rates and how they affect your Age Pension payments
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^ Contributing members of SASS are limited to contributing between 1-9% p.a. of superable salary. Deferred members cannot make contributions to their SASS account.
* Voluntary contributions include salary sacrifice and personal deductible contributions as well as after-tax contributions made from savings or monies from other sources such as proceeds from a term deposit that are contributed to super.
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