Work test repealed for voluntary superannuation contributions

Date of effectThe first financial year after Royal Assent of the enabling legislationExpected to be 1 July 2022

Individuals aged 67 to 74 years will be able to make or receive non-concessional or salary sacrifice superannuation contributions without meeting the work test. The contributions are subject to existing contribution caps and include contributions under the bring-forward rule.

Currently, the ‘work test’ requires individuals aged 67 to 74 years to work at least 40 hours over a 30 day period in a financial year to be able to make voluntary contributions (both concessional and non-concessional) to their superannuation, or receive contributions from their spouse.

Personal concessional contributions will remain subject to the ‘work test’ for those aged between 67-74.

Expanded access to ‘downsizer’ contributions from sale of family home

Date of effectThe first financial year after Royal Assent of the enabling legislationExpected to be 1 July 2022

The eligibility age to access downsizer contributions will decrease from 65 years of age to 60.

Currently, downsizer contributions enable those over the age of 65 to contribute $300,000 from the proceeds of selling their home to their superannuation fund. These contributions are excluded from the existing age test, work test and the $1.7 million transfer balance threshold (but will not be exempt from your transfer balance cap).

Both members of a couple can take advantage of the concession for the same home. That is, if a couple have joint ownership of a property and meet the other criteria, both people can contribute up to $300,000 ($600,000 per couple). 

Downsizer contributions apply to sales of a principal residence owned for the past ten or more years.

Sale proceeds contributed to superannuation under this measure will count towards the Age Pension assets test.

SMSF residency tests relaxed

Date of effectThe first financial year after Royal Assent of the enabling legislationExpected to be 1 July 2022

The residency rules for Self Managed Superannuation Funds (SMSFs) and small APRA regulated funds (SAFs) will be relaxed by extending the central control and management test safe harbour from two to five years for SMSFs, and removing the active member test for both fund types.

This change will enable SMSF and SAF members to contribute to their super while temporarily overseas, (as members of large APRA-regulated funds can do).

An SMSF must be considered an Australian Superannuation Fund in order to be a complying superannuation fund and receive tax concessions. If a super fund fails to meet the definition of an Australian Superannuation Fund then it is likely to become a non-complying, if this occurs the fund’s assets and income are taxed at the highest marginal tax rate.

This measure will enable SMSF and SAF members to keep and continue to contribute to their fund while predominantly undertaking overseas work and education opportunities.

SMSF legacy product conversions

Date of effectThe first financial year after Royal Assent of the enabling legislation

Individuals will be able to exit a specified range of legacy retirement products, together with any associated reserves, for a two-year period. This includes 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.

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.

The measure will permit full access to all of the product’s underlying capital, including any reserves, and allow individuals to potentially shift to more contemporary retirement products.

This will be a voluntary measure and not a mandated requirement for those individuals who hold these legacy accounts. 

Social security and taxation treatment will not be grandfathered for any new products commenced with commuted funds and the commuted reserves will be taxed as an assessable contribution.

Early release of super scheme for victims of domestic violence not proceeding

The Government is not proceeding with the measure to extend early release of superannuation to victims of family and domestic violence.

Technical changes to First Home Super Saver Scheme

Technical changes will be made to the First Home Super Saver Scheme to reduce errors and streamline applications. These include:

  • Increasing the discretion of the Commissioner of Taxation to amend and revoke FHSSS applications
  • Allowing individuals to withdraw or amend their applications prior to receiving an FHSSS amount, and allow those who withdraw to re-apply for FHSSS releases in the future
  • Allowing the Commissioner of Taxation to return any released FHSSS money to superannuation funds, provided that the money has not yet been released to the individual
  • Clarifying that the money returned by the Commissioner of Taxation to superannuation funds is treated as funds’ non-assessable non-exempt income and does not count towards the individual’s contribution caps.