Crystal Wealth Newsroom
Superannuation changes 2020-21
Over the past few months, several changes have been made to superannuation, in terms of both contributions and withdrawals.
While some would have been introduced without COVID-19 impacting us, others have been brought in to help smooth the impact of the global market fluctuations on investment values.
We’re working with our clients on strategies to help maximise the benefit of these changes. Here are the key areas of consideration, whether you’re growing your balance or are drawing a pension.
Pension payment minimums halved
As a response to the impact COVID-19 has had on the investment markets, the minimum pension drawdowns have been halved for this financial year. This applies to account-based income streams (including TTRs), market-linked pensions (or term allocated pensions) and allocated income streams.
This helps to preserve the capital for longer, reducing the minimum withdrawal when values have been lessened. Hopefully, this allows time for some smoothing to take place to minimise the impact of market fluctuations.
Temporary early access to superannuation
The government gave early access to $10,000 of superannuation in the last financial year, and there’s an additional $10,000 accessible now, too, until 31 December 2020.
This is something of a last resort if you need additional income to meet your debt obligations and/or living expenses.
You can access your super by applying online at my.gov.au, and is available to those who have been impacted by the economic effects of the Coronavirus being:
- you’re unemployed,
- you’re eligible to receive a Jobseeker payment, Youth Allowance for Jobseekers, Parenting payment (which includes the single and partnered payments), Special Benefit or Farm Household Allowance;
or, on/after 1 January 2020:
- you were made redundant; or
- your working hours were reduced by 20% or more; or
- if you are a sole trader – your business is suspended, or there was a reduction in your turnover of 20% or more.
For those clients who’ve accessed this money from their super and are in the accumulation phase of their wealth creation, we’ve put in place strategies to replace it through salary sacrifice and additional contributions.
Two extra years to make super contributions
From 1 July 2020, members under the age of 67 can make non-concessional contributions without meeting the work test (being 40 hours paid work in a 30-day period).
This provides a window to contribute super for a little longer, avoiding excess tax, and is lining up with what we expect the aged care pension to move to.
Members turning 67 shortly after 1 July 2020 need to act quickly to make any voluntary contributions (excluding downsizer contributions) before the date they turn 67; otherwise, the contributions cannot be accepted. This new opportunity could mean an additional $100,000 of non-concessional (after-tax) contributions, or more, into superannuation.
New spouse contribution rules
Another opportunity to contribute to super for longer as you head towards retirement comes courtesy of new rules that apply to spouse contributions. Under the new rules, from 1 July 2020 members can make spouse contributions where the receiving spouse is up to age 74 (previously limited to age 69). However, where the receiving spouse is aged 67 or over, they will need to satisfy the work test (being 40 hours paid work in a 30-day period).
Maximising personal deductible contributions
Since 1 July 2018, if a member makes concessional contributions less than the basic concessional contributions cap in a financial year (currently $25,000) then the unused concessional contributions cap amount accrues into future years (capped at five financial years). To be eligible, a member must have a total super balance of less than $500,000 at the end of the previous financial year. Potentially you may be entitled to make more than $25,000 as a concessional contribution in 2020/21 and up until your 67th birthday.
For example, if you’ve always put in, say $20,000 every year and you’ve got $5,000 leftover that accumulates, and it allows you to use that unused amount – in this case, $25,000, up to five years.
If you stopped contributing at 60 and ages 65 you have some money to invest into your super, you can use up to five years of those $25,000 caps.
Overall, flexibility is the key theme of these changes – there’s more opportunity to contribute, and the additional measures are intended to minimise losses from the current pandemic.
If you have questions about the changes in super regulations or would like some advice about your super strategy, please contact Chris or any of the team at Crystal Wealth Partners, who’ll be happy to help.