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Many Australians can expect a bumper tax return this year, thanks to backdated changes to income tax thresholds. Plus, there are other super-friendly changes being introduced.

A bigger tax return may be coming your way

The Australian Government’s Stage Two tax cuts were passed by Parliament in October last year, which means you may have already received a bump in your take home pay. However, because the cuts were backdated to 1 July 2020, almost one third of the money due could come through in the next refund. 

The tax sweetener is in addition to the Low and Middle-Income Tax Offset of up to $1080, which has also been extended for another year. How much each Australian gets depends on how much they earn. 

Given most Australians will get more tax back than they otherwise would, it’s a great chance to invest some extra cash in super and potentially save even more tax.

Super-friendly changes

As many Active Super members may know, making concessional contributions to super reduces your taxable income at the same time as increasing your nest egg. In other words, you can often pay less tax now and reap the benefits later. 

With the end of financial year (EOFY) fast approaching, the following tax and income changes may offer new opportunities to add more than you otherwise would to your super. 

  • Changes to non-concessional contributions cap: This will increase from $100,000 to $110,000 from 1 July 2021

  • Changes to concessional contributions cap: This will increase from $25,000 to $27,500 from 1 July 2021

  • Low and Middle-Income Tax Offset: As mentioned, Australians earning less than $126,000 will receive an offset between $255 and $1080. Putting this money straight into super could further reduce your taxable income.

  • NSW Local Government State Award increase: Local Government employees covered under the award will receive a 2 per cent pay rise from July. You may be able to channel the extra cash into your super without noticing a change in your lifestyle.


Other EOFY opportunities 

  • Personal deductible contributions: Making super contributions before the end of June may reduce the amount of tax you have to pay.

  • Carry-forward concessional contributions: Members with super balances below $500,000 at the end of the last financial year can use the ‘carry forward’ rule to make up for previous years where they didn’t hit the concessional cap. If they meet the conditions, members may save on tax when investing more in super.

  • Spouse contributions: If one spouse earns less than $40,000, the other spouse may receive an offset if they add to their partner’s super.
     
  • Spouse super-splitting: Again, if one partner is earning less than the other, the other partner can transfer up to 85 per cent of their concessional contribution to the other spouse to boost their super.

  • Government co-contribution: Members earning less than $54,837 who make after-tax contributions may be eligible for a government co-contribution of up to $500.


Super changes to add to your diary

The latest Federal Budget includes a number of superannuation and retirement changes that offer more options for contributing to superannuation and planning for retirement:

  • Earlier downsizer contributions: From 1 July 2022, members can contribute up to $300,000 from the proceeds of home sales to super from age 60, instead of 65.

  • Work test changes for those aged 67 to 74: The work test will be scrapped from 1 July 2022. This will make it easier for people in their late 60s and early 70s to make concessional and non-concessional contributions. The work test will still apply for making personal deductible contributions.

  • Removal of the minimum superannuation guarantee income threshold: The $450 monthly threshold for SG contributions will be removed on 1 July 2022. For casual workers, this may mean more frequent employer contributions.

  • Changes to the First Home Saver Super Scheme: From 1 July 2022, members saving for their first home can add up to $50,000 to their super under the scheme, up from $30,000.


For all of the above opportunities, additional eligibility criteria may apply. Also, some of the Budget changes have not yet been legislated, so keep an eye on your Active Super emails or arrange to speak to an Active Super representative to find out more. 

Active Super’s Budget Bulletin also highlights the key superannuation initiatives announced by the government in the May Budget.