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2021/2022 Federal Budget Summary

2021/2022 Federal Budget Summary 
After a few quiet years in the SMSF space, the 2022 Federal Budget has provided some major – member friendly changes that provide a lot of positives to trustees.  
Below is a summary of what to expect in relation to SMSFs: 
Work Test Removal & Extension to Bring Forward Provision  
OVERVIEW 
Work Test Changes: 
  • Currently where a member is aged between 67 and 74, they are required to meet the work test in order to be eligible to make a voluntarily contribution to super. 
  • The work test requires a member to be gainfully employed for a minimum of 40 hours over a consecutive 30-day period during the relevant financial year. 
  • From 1 July 2022 the work test will no longer be required to be met by individuals aged between 67 and 74 for non-concessional contributions or salary sacrifice contributions  
  • Where voluntarily concessional contributions (a personal concessional contribution) are made, the work test still needs to be met. 
Bring Forward Provision Changes: 
  • Currently where a member is aged under 65 years of age on 1 July of the relevant financial year, they can utilise the bring forward provision. 
  • From 1 July 2022 members aged between 65 and 74 will also have access to use their bring forward provision. 
  • This is provided the member is eligible from a total super balance perspective.  
  • Note the measure that was originally announced in the 2019-2020 Federal Budget whereby the proposed eligible age to access the bring forward provision would be increased from 65 to 67 from 1 July 2020 was not legislated. 
The table below summarises the above changes: 
Age 
Current 
Proposed 
< 60 
Work test: No requirement to meet the work test in order to make voluntary contributions. 
 
BFP: Can access BFP providing total super balance threshold is met. 
No Change 
 
 
60 -64 
Work test: No requirement to meet the work test in order to make voluntary contributions. 
 
BFP: Can access BFP providing total super balance threshold is met. 
No Change 
 
 
65 – 66 
Work test: No requirement to meet the work test in order to make voluntary contributions. 
 
BFP: Cannot access BFP. 
Work test: No requirement to meet the work test in order to make voluntary contributions. 
 
BFP: Can access BFP providing total super balance threshold is met (thresholds summarised below). 
67 – 74 
Work test: Must be met in order to make voluntary contributions  
 
BFP: Cannot access BFP. 
Work test: No requirement to meet the work test in order to make voluntary contributions. 
 
BFP: Can access BFP providing total super balance threshold is met (thresholds summarised below).  
75 +  
Work test: Can only receive mandated employer contributions regardless of whether the work test is met. 
No Change 
 
 
For a member to be eligible to access the bring forward provision, the following table represents what can be contributed: 
Total super balance on 30 June of previous year 
Non-concessional contributions cap for the first year 
Bring-forward period 
Less than $1.48 million 
$330,000 
3 years 
$1.48 million to less than $1.59 million 
$220,000 
2 years 
$1.59 million to less than $1.7 million 
$110,000 
No bring-forward period, general non-concessional contributions cap applies. 
$1.7 million or more 
nil 
Not applicable 
 
OPPORTUNITY 
Removing the requirement for individuals aged over 67 to meet the work test when making non-concessional or salary sacrifice contributions will increase flexibility for older retirees to save for their retirement and give them greater opportunity to contribute.  
Furthermore, the ability to access the bring forward provision until age 74 allows for members to place large sums of money into super within a very short period which in turn can provide a tax benefit for the members personal tax position given the enticing tax concessions within the superannuation environment. 
 
Downsizer Contribution Age Threshold Reduced to 60 
OVERVIEW 
  • Currently a downsizer contribution upon the sale of the family home can be made where the member is aged 65 or over. 
  • From 1 July 2022, the age threshold to be eligible to make the downsizer contribution will reduce to members aged 60 or over. 
  • All other requirements remain the same including the amount that be contributed and by who. 
  • Up to $300,000 can be contributed by a single individual or $600,000 by a couple (i.e., the member and their spouse). 
  • Where the property is solely owned by one member, their spouse will still be eligible to make their own respective downsizer contribution. 
Full eligibility criteria can be summarised as follows: 
  1. The member is 60 or older at the time they make a downsizer contribution. 
  1. The contract of sale is exchanged on or after 1 July 2018. 
  1. The home was owned by the member or spouse for 10 years or more prior to the sale (ownership period is calculated from the date of purchase settlement to sale settlement)  
  1. The home is in Australia and is not a caravan, houseboat or other mobile home. 
  1. The proceeds from the sale are either exempt or partially exempt from CGT under the main residence exemption or would be entitled to such an exemption if the home were a CGT rather than a pre-CGT (acquired before 20 September 1985) asset. 
  1. The SMSF has been provided with the Downsizer contribution from either before or at the time of making the downsizer contribution. 
  1. The downsizer contribution is made within 90 days of receiving the proceeds of sale. 
  1. The member has not previously made a downsizer contribution. 
OPPORTUNITY 
This measure will allow more individuals who are downsizing their home to contribute into super, particularly members who have exceeded $1.7 million (being the new cap as at 1 July 2022) within super and cannot make non-concessional contributions.  
Legacy Pension Retirement 
OVERVIEW 
  • Members in receipt of pensions such as market linked, life expectancy and lifetime pensions (commonly referred to as ‘legacy pensions’) currently face several restrictions including when the pension can be accessed, how much can be accessed in addition to strict commutation constraints. 
  • From 1 July 2022 a member will have the option to commute these pensions back to accumulation phase over a two-year period 
  • One important thing to note is that any member in receipt of a legacy pension may not wish to instantly proceed with commuting due to the social security benefits that can be associated with these types of pensions.  
  • Some legacy pensions currently receive a 50% or 100% discount from government asset testing which in turn provide a greater opportunity for the member to be eligible to receive an age pension (or larger aged pension) 
  • Where these types of pensions are commuted, any discount currently being received will be lost. 
OPPORTUNITY 
For members that have forever wanted to commute legacy pensions due to the complex nature in maintaining them, these new measures now provide the ability to do so.  Although there may be social security benefits in maintaining the legacy pension, the ability to simplify the annual pension process is something for members to at least consider.  
Residency Requirement Changes 
OVERVIEW 
  • For an SMSF be considered an Australian fund, it must pass the residency test. 
  • Currently the tests are as follows: 
  • Test 1 – The fund was established in Australia, or at least one of the fund’s assets is in Australia. 
  • Test 2 – At least 50% of the fund’s active members must be in Australia. 
  • An active member is someone who either contributes or makes a rollover. 
  • This is assessed based on a member’s market value of their members. balance. 
  • Test 3 – The central management & control of the fund must be completed within Australia. 
  • If central management and control is temporarily outside of Australia for less than 2 years, this requirement will still be met. This is also referred to as the safe harbour rule. 
  • Changes made from 1 July 2022 are as follows: 
  • The active member test (test 2) will be removed. 
  • The central management & control safe harbour rule will be extended to 5 years. 
 
OPPORTUNITY  
This measure provides the ability for members to contribute whilst temporarily overseas, particularly when the reason is due to working commitments. A member’s employer can now continue to contribute into the SMSF.  
First Home Super Saver Scheme (FHSSS) Releasable Amount Increased 
OVERVIEW 
  • Where a member makes voluntary concessional and non-concessional contributions, they may have been eligible to withdraw up to $30,000 under the FHSSS, referred to as the ‘Releasable Amount’. 
  • From 1 July 2022, the releasable amount has been increased to $50,000. 
  • Note eligibility is assessed on an individual level, therefore if a couple are buying a house jointly to which both have never owned a house previously, they may both be eligible to access part of their super. 
OPPORTUNITY 
This measure will continue to assist first home buyers raise the required funds for their initial deposit provided they have made personal concessional or non-concessional contributions.  Unfortunately, it’s unlikely that those yet to buy a home would have had the available funds to consider making voluntary contributions in which to access this benefit.  
  
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