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Significant changes for super contributions were announced in the Federal Budget on May 11 which, if given the go ahead, will start from July 1, 2022.
Some of these include…
- Removing the $450 per month earning threshold for the Super Guarantee.
- Scrapping the work test rule so people aged 67-74 can continue contributing to their super within existing caps.
- Making downsizer contributions available from age 60 rather than 65 so singles can contribute up to $300,000 ($600,000 for couples) to their super from the sale of the family home.
- Improving the Pension Loans Scheme (PLS) so eligible retirees can withdraw lump sums as well as income. The PLS is a type of reverse mortgage allowing asset rich/cash poor retirees to tap into the value of their home without the need to repay the debt until they move or after their death.
- Allowing retirees to switch from legacy super products into new, more flexible ones.
We asked how these changes might benefit Australians who are retired, semi-retired, or nearing retirement. Here’s what they said…
Rob, 68, shop owner, semi-retired
“We own our home and have a second-hand furniture shop. The shop makes a good turnover. We have been able to purchase two other properties over the years. The rent from these properties provides a good income, although tenants always seem to need things repaired which can be costly. I want the flexibility to be able to continue making contributions to my superannuation account and maximise my retirement income. We will probably sell the shop eventually, but for now it’s good work for me.”
Hettie, 47, receptionist
“Getting rid of the $450 monthly threshold will help grow my retirement savings. My husband works fulltime. We have two kids at high school and are paying off our house. I do casual shifts but sometimes earn less than $450 a month so I miss out on the Super Guarantee. Removing that threshold is a really good thing. I’ll definitely benefit from it.”
Alex, 41, graphic designer, works fulltime
“I hope I will be eligible for the extended First Home Super Saver Scheme. Property prices are still going through the roof, but in the next few years we could see them come down again. The FHSS Scheme could help me raise a deposit for my first house. It could be a better return and significant tax savings.”
Peter, 59, semi-retired
“Like many people, I’ve been trapped into paying for expensive, outdated legacy super products. My fund doesn’t allow me to draw down on my retirement savings, which is ridiculous. I want to work less but still contribute to my super savings. If the federal government makes it easier for people like me to get out of these products without penalty, then that’s what I will do. I will move my money into a tax-free income stream and keep working.”
Eddie, 64, designer, works part time
“Removing the work test so people between 67 and 74 can continue making voluntary contributions to their super is long overdue and entirely reasonable. People in this age group who want to continue working – myself included – will welcome the ability to keep adding to their super for as long as possible. Still, I don’t get why there’s a differentiation between salary sacrifice contributions and personal deductible contributions. Why make it more confusing?”
Marlee, 36, casual hospitality worker
“I’m pleased to see they will abolish the $450 per month cap that makes it harder for casual and low-income earners like myself to build up their retirement savings. It’s particularly hard for women. Usually there are a lot of jobs around for casual hospitality staff. I work at three different venues but none of my employers pays me more than $450 a month, so I don’t get the Superannuation Guarantee payments. When that $450 a month threshold is removed it will be a big relief for a lot of people, especially mums who can’t work long hours and casual workers like me who juggle many jobs.”
Gavin, 55, small business owner
“In a few years my wife and I will be able to make maximum post-tax contributions to our super of up to $600,000 when we sell the family home. That’s worth looking into and maybe it would encourage us to downsize earlier. Otherwise, I don’t think small retail business owners have much to celebrate in this budget.”
Olivia, 56, copy writer
“More people are working for longer, but still a lot of us worry about not having enough savings for a comfortable retirement. People want to top up their super accounts which is a good thing, so I like the new rule that allows older Australians who are still working to continue making contributions. The more money I can put away before I stop working, the better.”
Jack, 63, gallery owner, retired
“Being able to use the equity accumulated in residential property would benefit us. My wife and I are no longer on high incomes, and we don’t have access to large amounts of cash, but we have owned our own home for more than a decade. If we meet the conditions, the Pension Loans Scheme would help us supplement our retirement income by taking out a federal government loan against the value of our house. That could make a big difference to our retirement income.”
Bob, 63, photographer
“I think scrapping the work test rule makes sense. Everyone should be contributing to their super. I was shocked at how many people withdrew funds from their accounts under the COVID-19 superannuation early release program. A lot of young people who withdrew $10,000 or $20,000 probably didn’t realise the impact that would have on their super balance come retirement. I encourage all working Australians to salary sacrifice whatever they can afford. You are investing in the best years of your life, so give generously!”