Reminder: super changes for the 2021 financial year
The government’s long slated flexibility in superannuation legislation is finally law. What this means is from 1 July 2021, individuals aged 65 and 66 can now access the bring forward arrangement in relation to non-concessional contributions. The excess contributions charge will also be removed for anyone that exceeds their concessional contributions cap and individuals that received a COVID-19 super early release amount can now recontribute up to the amount they released without it counting towards their non-concessional cap.
From 1 July 2021, a whole raft of superannuation changes as a part of the government’s more flexible superannuation changes has come into effect. Three of the most important changes consist of the increase in bring-forward arrangement contributions cap, the removal of the excess contributions charge, and re-contribution changes.
Previously, if you made contributions above the annual non-concessional contributions cap, you were able to automatically gain access to future year caps if you were under 65 at any time in the financial year. The bring forward arrangement would allow you to make non-concessional contributions of up to three times the annual non-concessional contributions cap in that financial year.
With the passing of the more flexibility in super legislation, individuals aged 65 and 66 that were previously unable to access the bring forward arrangement in relation to non-concessional contributions are now able to do so.
For the 2021 income year, the non-concessional contributions cap is $110,000, which means that those individuals aged 65 and 66 are able to access a cap of up to $330,000 under the bring forward arrangement.
From 1 July 2021, excess contributions charge will also be removed. By way of background, any individual that exceeded their concessional contributions would have been liable to pay the excess concessional contributions charge as well as the additional tax when the excess contributions were withdrawn and included in their assessable income. The charge was approximately 3% and was calculated from the start of the income year in which the excess contributions were made to the day before the tax is due to be paid.
Individuals that make concessional contributions exceeding their cap on or after 1 July 2021 will no longer be liable to pay the excess concessional contributions charge. They will, however, still be issued with a determination and be taxed at their marginal tax rate on any excess concessional contributions amount, less a 15% tax offset to account for the contributions tax already paid by their super fund.
With the fast moving COVID-19 situation last year, many individuals lamenting lack of financial support from the government early on opted to withdrawal their super as a life line. Under the COVID-19 early release, individuals were able to apply to have up to $10,000 of their super released during the 2019-20 financial year and another $10,000 released between 1 July and 31 December 2020.
According to ATO data, between 20 April 2020 and 31 December 2020, it received 4.78m applications for early release, totalling $39.2bn of super requested for early release. Now, not all of the individuals that applied to have their super released ended up needing it as the government ramped up its financial support programs (ie JobKeeper, JobSeeker, Cash flow boost etc).
From 1 July 2021, those individuals that received a COVID-19 super early release amount are now able to recontribute up to the amount they released without the contributions counting towards their non-concessional cap. The recontribution amounts must be made between 1 July 2021 and 30 June 2030 and super funds must be notified in the approved form of the recontribution either before or at the time of making the recontribution.
Would you like to take advantage of the changes?
If you’d like to take advantage of the bring-forward arrangements or recontribute early release super, we can help with this and many other super planning strategies. Contact us today for expert help and advice.
IMPORTANT: This communication is factual only and does not constitute financial advice. Please consult a licensed financial planner for advice tailored to your financial circumstances. Email us at Robert Goodman Accountants at reception@rgoodman.com.au . © Copyright 2021 Thomson Reuters. All rights reserved. Brought to you by Robert Goodman Accountants.
