Treasurer Josh Frydenberg told Parliament the government’s plan would “make it easier for Australians to prepare for retirement and to be more secure once in retirement.”
“We want all Australians to get the most out of the superannuation system,” he said in his Budget speech.
The Treasurer said the government will also “enhance” the Pension Loans Scheme, allocating around $21m over the next four years to make it more attractive to prospective participants. This voluntary scheme allows eligible retirees to use some of the equity in their home to help supplement any pension payments they may already receive.
In terms of changes to the superannuation system itself, key measures announced in the Budget include:
- The work test will be abolished for some super contributions.
- The minimum age to access super contributions from downsizing your home will be reduced.
- The minimum wage threshold for compulsory super will be scrapped.
So what are the details of these plans, and how could they affect you and your retirement plans?
The work test abolished for some super contributions
From 1 July 2022, people aged 67 to 74 will no longer have to meet a work test to make voluntary non-concessional or salary-sacrificed contributions to their superannuation. This change could benefit people who have retired or moved to reduced hours and have savings they want to use to top up their super.
Under the existing rules, people in this age range have to work at least 40 hours during a consecutive 30-day period in the financial year in which the contributions are made. That work-test rule still applies, though, if people aged 67 to 74 want to make or receive other types of concessional (pre-tax) contributions, such as compulsory super payments from their employer.
Earlier access to super contributions from downsizing your home
The government is lowering the minimum age for people who want to downsize their home and use up to $300,000 from the sale as a one-off contribution to their super. The current age limit is 65, but that will drop to 60. The home must still be the main place of residence and owned for at least 10 years.
AMP technical strategy manager John Perri told Canstar if a home was owned by a couple, the downsizing rules would allow both people to make that one-off contribution to their super ahead of retirement, assuming the sale price of their home was high enough.
“It allows people from age 60 to consider whether downsizing is good for them,” he said.
No minimum wage threshold for super
The government also announced it would remove the $450 per month minimum wage threshold for compulsory employer contributions to super. If this measure becomes law from 1 July 2022 as expected, employers will generally have to pay an employee super as soon as they start earning money, which the government said should benefit people on low incomes.
Mr Perri said this should also make it easier for employers in some ways, as almost all employees in Australia would be eligible for super contributions no matter what they earned.