As the next phase of the government’s Your Future, Your Super reforms are scheduled to kick in on 1 July 2021, we revisit the changes and share some tips to help you get the most from your superannuation.
For the first time, you will automatically keep your super fund when you change jobs, unless you select another fund. Your super account will effectively be ‘stapled’ to you when you move employer, stopping the creation of unintended multiple super accounts that potentially erode your balance over time.
Given these changes, it’s now more important than ever to take an active approach to reviewing your current super arrangements and deciding which fund to instruct your current and future employers to direct your super contributions to. You can easily find all of your super accounts by visiting the ATO website. From there, consolidation of your accounts and choosing where to direct future payments should be the next step, but you may want to speak to a financial adviser to understand how this will affect you and your circumstances.
Maximise your contributions before 30 June
There are a number of ways you can contribute to and grow your super balance, as well as the Superannuation Guarantee paid by your employer. Some ways to top-up your super include salary sacrifice, non-concessional contributions and also making contributions for your spouse.
It’s important to understand these additional methods of contribution, as there are rules around how much you can contribute each financial year and over a lifetime. You can learn more about the different contributions available to you on the government’s MoneySmart website. If you accessed the early-release scheme in 2020, you could consider topping up your super balance before the end of the financial year.
Check with your super fund ahead of time to know the final date that they will accept contributions for this financial year. It’s important to bear in mind that super funds must receive contributions by 30 June each year, which means you may need to make the payment well in advance.
What are the main changes to superannuation from 1 July 2021?
Super contribution caps change
From 1 July 2021 contribution limits for super will be increasing, which may help boost your super balance.
The concessional and non-concessional contribution caps will be:
*If total super balance is below $1.7 million.
You may not make non-concessional contributions to your account if your total superannuation balance is equal to or exceeds the stated threshold. From 1 July 2021 this threshold increases from $1.6 million to $1.7 million.
If you meet the relevant eligibility requirements, you may be able to make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year. It is important to note, however, that if you started a ‘bring forward’ arrangement before 1 July 2021, you will not have access to any additional contribution capacity as a result of the increase to the non-concessional cap. Again you may want to consider talking to a professional adviser before relying on the ‘bring forward’ rule.
Superannuation Guarantee change
For those who receive super contributions from their employer via the Superannuation Guarantee (SG), the legislated increases in the SG rate will apply. Employers will need to increase the SG contributions they make for their employees from 9.5% of employee earnings to 10% from 1 July 2021.
Pension drawdown will revert to standard default minimums
Following the onset of COVID-19, temporary changes were put in place that allowed pension drawdown minimums to be reduced by up to half the legislated amount. For retirees the standard minimum drawdown requirements will apply from 1 July 2021. If you are an existing pension income recipient from your pension account, your payment amount may automatically increase from 1 July 2021.
If you would like further information or help with your superannuation please contact your financial adviser, or you can contact our Client Services team for help with your Allan Gray Superannuation and Allan Gray Retirement queries.