What to expect from superannuation changes in 2022
Superannuation is an effective way to grow retirement savings while enjoying tax benefits along the way, but it isn’t without its challenges. It can sometimes be difficult for employers to wrap their heads around the rules and regulations involved, particularly as there have been several legislative reforms made over the years.
In this article, we look at the important superannuation changes that apply from 1 July 2022, which are largely designed to simplify the superannuation scheme. We encourage employers to make sure they are across these changes to meet your super obligations, but also ensure that you don’t miss an opportunity to grow your team’s retirement nest egg.
Superannuation changes that affect payroll processes
Single Default Account (‘stapling’)
While this legislation has been in effect since 1 November 2021, from 1 July 2022 the Australian Taxation Office (ATO) will begin to enforce compliance from employers. That’s why it’s worth going over what ‘stapling’ is again, and what you need to do to remain compliant.
The ‘stapling’ rules mean that if your business has a new staff member join and during their onboarding process, they did not select their own super fund, employers need to take an extra step to comply with ‘choice of fund’ rules.
In this instance, the employer is required to search for that employee’s existing (stapled) fund using the ATO Request Stapled Fund Online Service. Employers can request their employee’s stapled super fund details after the employee has submitted a tax file number (TFN) declaration or Single Touch Payroll (STP) pay event.
The ‘stapling’ rules were introduced as a way to reduce the chances that employees would end up with multiple superannuation accounts when they moved from one job to another. Having more than one super fund can be costly for employees, as they can end up paying multiple sets of insurance premiums and fees.
For more information on how ‘stapling’ works read our article: Are you ready for Stapling?
Superannuation Guarantee increase to 10.5% coming 1 July 2022
The Superannuation Guarantee is the minimum percentage of a person’s salary (ordinary time earnings) that you as the employer must pay into their superannuation. Last year, this guarantee was increased to 10% on 1 July 2021, and from 1 July 2022 this will increase again to 10.5%.
These incremental increases form part of a longer-term plan to increase the Superannuation Guarantee rate to 12% by 1 July 2025.
If you use any of the leading payroll software providers that integrate with Beam, this incremental increase should automatically be calculated as you are creating your pay runs.
Removal of the $450 a month income threshold
As it currently stands, if an employee earns less than $450 a month, no superannuation is required to be paid to that team member. What this has meant historically, is that casual, part-time, freelance and low-income workers often faced being left out of the superannuation system.
Effective from 1 July 2022, the low-income threshold will be removed. Employers will be required to make superannuation contributions for all eligible employees, regardless of the amount they earn. This will see around 300,000 more people receiving contributions to better help their financial wellbeing in retirement.
Similar to the superannuation guarantee increase mentioned above, all payroll software providers that integrate with Beam should have this change recognised automatically in the payroll run process.
Removal of super contribution “work test”
At present, if you have an employee aged 67 to 74, and they want to make voluntary contributions (including salary sacrifice) to super, they need to either, have been employed for 40 hours or more in any 30-day period in the relevant financial year, or recently ceased working and met this requirement the previous financial year. This is known within the industry as the ‘work test’.
With this work test being abandoned, it means from 1 July 2022, there will be no work-based restrictions for making voluntary contributions for any person under the age of 75, subject to existing contribution cap limits.
However, the work test will still need to be met to claim a tax deduction for any personal non-concessional contributions for those aged 67 to 74. Rather than the fund checking at the time of the contribution the ATO will check at the time of the individuals tax return being submitted.
Other superannuation changes
There are some other superannuation changes that will come into effect from 1 July 2022. While it is important to be aware of all the coming changes, the following reforms won’t have any direct impact on your employer super obligations.
Lower age threshold for super downsizer scheme
If someone is considering downsizing and selling their main residence as they approach retirement, they may be able to contribute up to $300,000 from the property sale into their super fund. This is what is referred to as downsizer contributions.
From 1 July 2022, the eligibility to make downsizer contributions is being extended from people aged over 65 to those aged 60 and older, with the person selling still needing to meet the normal downsizer conditions surrounding the sale of their main residence.
You can learn more about this benefit on the ATO website.
Higher withdrawal limit for First Home Super Saver Scheme
The First Home Super Saver Scheme (FHSSS) was introduced to help first homeowners save a deposit for a property through their super. If eligible requirements are met, then someone can voluntarily contribute to save a deposit for a home. They can then withdraw up to $15,000 they have contributed in any individual financial year to a maximum of $30,000 across all years, when they are ready to purchase their first home.
The new reform that comes into effect from 1 July 2022 is to allow an increase in the maximum amount of voluntary contributions that you can withdraw using the FHSSS. This withdrawal amount will increase from $30,000 to $50,000. The $15,000 limit for each individual financial year remains in place.
You can learn more about the FHSSS by visiting the ATO website.
How Beam makes superannuation compliance simpler
Here at Beam, our APIs work seamlessly with payroll software providers to deliver integrated super payments and STP reporting for business clients.
Whenever legislation and employer obligations change, Beam is always on top of incorporating any required changes into the software, so that your business knows your payroll software is going to do the hard work for you in keeping up with any superannuation changes that impact on payroll.