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There are lots of rules when it comes to our super system. But not every rule applies to you at every age, so it’s worth figuring out which ones have an impact in your particular age group.
The rules at different ages govern how much and when you can contribute to super, when you can get your hands on your savings and how much tax you will pay. These rules are designed to stop people taking advantage of the generous tax benefits offered as part of Australia’s super system.
To make things a bit easier to understand, here’s SuperGuide’s simple explainer of the super rules if you’re in the early to mid stages of your working life.
Super rules if you’re in your 20s, 30s and 40s
The super system is designed to help you save money for your retirement over your entire working life. It holds money contributed by you and your employer and will help supplement your income during your retirement years.
In the years leading up to age 50, there are no particular super rules applying specifically to your age group, but these are the years when you should be paying attention to your super account to ensure it’s growing steadily, and your fund is providing you with the returns and services you need.
The rules that do apply to your super during these years are split between those covering when money goes into your super account (contributions) and when it comes out (withdrawing):
1. Contributing to your super
Superannuation Guarantee (SG)
Once you are aged 18 and are being paid $450 or more (before tax) in a calendar month and work more than 30 hours a week, your employer must pay SG contributions (10% in 2021–22) on your behalf into your super account.
If you meet these eligibility conditions, super is payable regardless of whether you are working full time, part time or are casually employed. If you are a contractor paid ‘wholly or principally for labour’, you may be considered an employee for super purposes and entitled to SG payments.
If you work in a private or domestic capacity (for example, as a paid nanny), you still need to work more than 30 hours per week to qualify for employer-paid SG contributions.
Your employer is not required to make SG contributions on your behalf if you don’t meet the SG eligibility conditions.
There are annual limits or caps on the amount of money you and your employer can contribute into your super account.
From 1 July 2021, the annual general concessional (before-tax) contributions cap is $27,500 for everyone, regardless of their age. From 1 July 2017 to 30 June 2021, the annual general concessional contributions cap was $25,000.
Some people may have a higher annual concessional contributions cap for a particular year. From 1 July 2018, you can make carry-forward concessional super contributions if you qualify. Carry-forward contributions allow you to use any of your unused annual concessional contributions cap for up to five years to make a larger concessional contribution in a future year.
From 1 July 2021, your annual general non-concessional (after-tax) contributions cap is $110,000. From 1 July 2017 to 30 June 2021, the annual general non-concessional contributions cap was $100,000.
As you are aged under 67, you may also be able to contribute up to three years of your annual non-concessional cap in a single year. Using the bring-forward rule, you can contribute up to $330,000 ($110,000 x 3 years = $330,000) in a single year. The actual amount you may be able to contribute using the bring-forward rule depends on your current Total Superannuation Balance (TSB).
You do not need to meet a work test to make a non-concessional contribution, but your TSB must be under $1.7 million. From 1 July 2017 to 30 June 2021 the TSB cap was $1.6 million.
Personal (or voluntary) tax-deductible super contributions
From 1 July 2017, most people in this age group – whatever their employment status – are able to claim a tax deduction for any personal voluntary contributions they make into their super account.
If you’ve got cash to spare and would like to boost your retirement savings, making a tax-deductible voluntary super contribution can be a great way to do it during the early years of your working life.
First Home Super Saver (FHSS) Scheme
Buying your first home is usually a high priority during these years, so the government’s FHSS Scheme could be a useful way to save part of your deposit inside the lower-taxed environment of the super system.
Your FHSS contributions (up to $30,000) are counted towards your concessional or non-concessional super contribution caps.
Currently, you are eligible to apply to release up to $30,000 from your super account under the FHSS Scheme. But in the May 2021 Federal Budget, the government announced this amount would rise to $50,000. This proposal is not yet law, but is intended to start from 1 July 2022.
Self-managed super funds (SMSFs)
For many people in their 20s, 30s and 40s, it could be worth thinking about establishing your own SMSF if you are interested in taking more control of your retirement savings. However, it’s important to remember SMSFs must adhere to lots of rules and you will have the ATO looking over your shoulder.
An SMSF can have no more than six members at any one time. A member cannot be an employee of another member unless they are related.
You cannot be a trustee of an SMSF if you have been convicted of an offence involving dishonest conduct, been subject to a civil penalty under super law, are insolvent or an undischarged bankrupt, or been disqualified from acting as a trustee of a super fund.
2. Withdrawing your super
Getting your money
To access your super, you need to have reached your preservation age and met a condition of release.
If you are in your 20s, 30s and 40s, your preservation age is 60 as you were born after 1 July 1964.
Hardship, compassionate and COVID-19 provisions
If you’re in your 20s, 30s or 40s, it’s possible to access some of your super early if you are suffering severe financial hardship, provided you meet strict eligibility conditions.
You can also apply for early release based on compassionate grounds.
During 2019–20 and 2020–21, the government permitted super fund members impacted by COVID-19 to withdraw up to $20,000 from their super account if they met strict eligibility criteria.
From 1 July 2021 to 30 June 2030, people who used this measure to release money from their super account will be able to re-contribute the money without their contribution counting towards their annual non-concessional contributions cap. If you choose to re-contribute your COVID-19 withdrawal amount, you cannot claim the contribution as a personal tax deduction, and it’s limited to amount you chose to withdraw.