The federal government has introduced into parliament the bill that will give effect to a range of measures announced in this year’s budget, including the repeal of the work test for non‑concessional and salary sacrificed contributions and the reduction in the eligibility age to make downsizer contributions.
The Treasury Laws Amendment (Enhancing superannuation outcomes for Australians and helping Australian businesses invest) Bill 2021 also includes measures to allow SMSF trustees to use their preferred method of calculating exempt current pension income (ECPI) where their fund is fully in the retirement phase for part of the income year, but not for the entire income year.
Superannuation, Financial Services and the Digital Economy Minister Jane Hume said the change to the work test will be implemented via regulation changes the government will put forward by the end of the year.
“The legislation introduced today preserves the work test for personal deductible contributions made by individuals aged between 67 and 75,” Senator Hume said.
“It will also make amendments necessary to allow eligible individuals to make non‑concessional superannuation contributions under the bring‑forward rule. This will improve flexibility for older Australians to contribute to their superannuation.”
She added the reduction in the eligibility age to make downsizer contributions from 65 to 60 will “allow more older Australians to consider downsizing to a home that better suits their needs, freeing up the stock of larger homes for younger families”.
Commenting on the bill in a blog post, Heffron managing director Meg Heffron said it provides details that were not present in the budget announcements, including that the work test would still apply if a super fund member wanted to claim a tax deduction for the contribution.
Heffron added the new rules also extend bring-forward opportunities up until the year in which a member turns 75 and while the explanatory memorandum states the changes are not intended to allow people to use caps in the years when they turn 76 or 77, this may still be possible.
“It’s difficult to see how the current legislation stops this from happening,” she said.
“The change set out in this bill would allow someone with a total super balance of less than $1.48 million at 30 June 2022 who turns 75 in November 2022 to make non-concessional contributions of $330,000 in October 2022. In doing so, they would be using their caps for 2023/24 and 2024/25.”
She noted the ECPI changes allows trustees to choose the actuarial certificate method for the whole year or use the segregated method to calculate ECPI during periods when the fund is 100 per cent supporting retirement-phase pension accounts, and the proportionate or actuarial certificate method for the rest of the year.
“This is a vastly simpler approach than the one initially proposed by the government in which the trustee could make different choices for different parts of the year. We expect actuaries, software providers, accountants and financial advisers all just let out a huge sigh of relief.”
Two measures announced in the budget related to changes in the SMSF residency definition and the proposed relief for legacy pensions were not included in the bill.
