Superannuation rule changes: most will help your wealth grow faster

Governments in Australia just can’t keep their hands off changing rules around superannuation – so it’s wise to understand them.

Governments in Australia just can’t keep their hands off superannuation rules.

Whatever side of politics is running the country, tweaks keep coming. Fortunately most of them lately are like welcome massages rather than painful arm twists, although wealthy savers may feel some future discomfort.

It’s been a busy 2022 for superannuation tinkering, with changes benefiting many of the 23 million super accounts in Australia.

Knowing how you are affected is vital to ensure you are not getting ripped off, aren’t paying too much in tax, and are cooking your nest egg at the right temperature.

Here’s what you should know.

1. COMPULSORY SUPER RISE

On July 1 the amount your boss pays into your super jumped from 10 to 10.5 per cent of your annual pay, and it’s rising to 12 per cent by July 2025.

The good news for younger workers is that those who have a full career with 12 per cent super should grow a big enough nest egg for comfortable retirement, in combination with some age pension.

2. GOODBYE THRESHOLD

Lower-income workers have also benefited, with all workers now being paid compulsory super by their employer regardless of their income. Before July, only employees earning above $450 a month had to be paid employer contributions.

Make sure your boss is paying your super by checking with your fund or your ATO data through my.gov.au.

Workers are getting more superannuation and more flexibility.

3. DOWNSIZERS’ DELIGHT

The recent federal budget unveiled plans to relax the rules for people making downsizer contributions to their superannuation after selling their home. It allows older Australians to each pump $300,000 in one hit into their super, and the budget change - yet to pass through parliament - lowers the qualifying age from 60 to 55.

However, RSM Australia director of financial services Grace Bacon warns it will be locking people’s money away for 5-10 years, and downsizing a home may potentially lead to reduced age pension payments later.

“Also, while adding $300,000 in a single contribution might sound like a great way to maximise your superannuation, this may affect your ability to access other contribution strategies that could provide a further balance boost – strategies such as tax deductible carry-forward contributions and non-concessional contributions,” she says.

4. AGE LIMITS RELAXED

Older Australians can now make personal super contributions more easily.

“The age limit for making voluntary personal contributions to super rose from 67 to 75 and there is no longer the requirement for contributors to meet the work test – previously, you had to work a minimum of 40 hours in 30 days,” Bacon says.

“As long as your current balance is under the Superannuation Cap Limit of $1.7 million you are able to make personal contributions into your superannuation account.”

The vast majority of Australians have super balances well below that amount, with the average super balance of a male aged 60-64 sitting at $358,000 and a female at $288,000. Median balances, which are more accurate, are $181,000 for men and $139,000 for women aged 60-64.

Those with big bucks are likely to take a hit soon, with Labor foreshadowing a debate about whether some of super’s generous tax concessions should be stripped from wealthy retirees – especially those 11,000 Australians with nest eggs larger than $5 million.

Saddled by a massive national debt, the government is likely to seize the opportunity to trim those tax breaks.

Originally published as Superannuation rule changes: most will help your wealth grow faster