Changes to superannuation on 1 July 2021

Updated 12 July 2021

This article was originally published on 14 June 2021 and has been updated following the Government’s More Flexible Superannuation Bill, which passed into legislation on 22 June 2021.

On 1 July 2021 a few changes were made to superannuation rules that could change the way you save and grow for your retirement.

Here’s our quick rundown of the changes.

1. The employer contribution rate increased to 10%

The Superannuation Guarantee (SG) employer contribution rate increased to 10% on 1 July 2021.

The Superannuation Guarantee rate is the minimum percentage of an individual’s salary (ordinary time earnings) that their employer must pay into their superannuation. The SG rate has been 9.5% since 2014.

This year’s increase is part of the Government’s long-term plan to increase the rate to 12% by 2025.

Higher contribution arrangements for local government employees who are eligible (under the Local Government Act) did not change on 1 July 2021.

2. Contribution caps have increased

The annual limit on how much you can pay into super increased on 1 July 2021.

Caps for both concessional (before-tax) and non-concessional (after-tax) contributions have been increased for the 2021/22 financial year – as shown in the table below.

For further information, refer to our contributions cap info sheet.

These cap increases could benefit individuals who are accessing bring-forward arrangements (non-concessional contributions) or carry-forward rules (concessional contributions):

• Bring-forward arrangements can enable eligible individuals aged under 67 years (see below for increased age restriction) to make up to three years’ worth of non-concessional contributions in a single year – which for 2021/22 could now be up to $330,000.
  
  If an individual triggered a bring forward arrangement prior to 1 July 2021 then the concessional contribution cap remains at $300,000.
  
  Refer to the Australian Taxation Office (ATO) website for details about eligibility. 

• Carry-forward rules for concessional contributions remains the same. You may be able to carry forward any unused amounts under your cap into the next financial year (if your total super balance was less than $500,000 at the end of the previous financial year). These carried forward amounts will expire after five years.
  
  Refer to the ATO website for details about eligibility.

Higher income earners who have a contributions cap agreement with their employer may need to review the agreement, so that it includes the increased concessional contribution cap ($27,500).

3. The age restriction for bring-forward arrangements has increased

On 1 July 2021, the age restriction for bring-forward arrangements (see above) was increased from 65 to 67 years.

This means that individuals aged 65 and 66, who were not previously able to access the bring forward non-concessional contributions cap, may now do so. This change applies to non-concessional contributions made on or after 1 July 2020.

Further information on this change is included in the ATO’s web page on More Flexible Superannuation legislation.

4. The excess contributions charge has been removed

From 1 July 2021, individuals who exceed their contributions cap will no longer be charged an excess contributions charge. They will still be issued with a determination and taxed at their marginal tax rate on any excess concessional contributions amount (with a 15% tax offset to account for the contributions tax already paid by their super fund).

Further information on this change is included in the ATO’s web page on More Flexible Superannuation legislation.

5. Re-contribution of COVID early release of super

Individuals who received a COVID-19 early release of super (for 2019/20 and 2020/21) will be able to re-contribute up to the amount they received without the contributions counting towards their non-concessional cap.

Further information about conditions and eligibility is included in the ATO’s web page on More Flexible Superannuation legislation.

6. Changes to the transfer balance cap

The transfer balance cap is the maximum amount of super that an individual can transfer into retirement phase income streams during their lifetime.

The general transfer balance cap has been $1.6 million since 2017, and on 1 July 2021 it was indexed to $1.7 million.

Indexation means there won’t be a single cap that applies to all individuals. Instead, every individual will have their own personal transfer balance cap of between $1.6 and $1.7 million, depending on their circumstances.

Refer to the ATO website to find out how your transfer balance cap would be calculated.

We’re here to help

If you would like further information about these changes, please call us on 1800 444 396.