ARTICLE
Super contributions and considerations for the 2021/22 financial year
22 February 2022
2 mins read
2 mins read
Have you considered checking in with clients to see how their superannuation contributions are tracking and consider what opportunities remain for them in 2021/22?
With more than half of the financial year over, it may be a good time to check-in with clients to see how their superannuation contributions are tracking and consider what opportunities remain for them in 2021/22.
In the last year, the super guarantee (SG) contribution rate increased from 9.5 % to 10%, while the concessional contribution (CC) cap increased to $27,500. These changes are important to consider for clients who are salary sacrificing or looking to establish an arrangement with their current or new employer for the following reasons:
- To ensure the amount they are salary sacrificing factors in their employer’s increased SG contributions and they don’t exceed their CC cap.
- Clients who are business owners with employees need to ensure they are meeting their increased SG obligations which may include themselves as employees receiving wages or salary and/or director fees.
- Their effective CC cap amount may be higher than $27,500 if the client was to use their carry-forward unused concessional contributions that may have accrued from 1 July 2018. Please refer to the ATO for the carry forward contribution rules and eligibility criteria.
For clients who are either making or looking to make after-tax contributions, the non-concessional contribution (NCC) cap and the Total Super Balance (TSB) threshold have both increased, effective from 1 July 2021. The 1-year NCC cap has increased to $110,000 and respectively, the 2-year bring forward provision has increased to $330,000 with the TSB moving to $1.7m as of 30 June 2021. These changes may have an impact on your clients’ NCC strategies in the current and future financial years. They also provide an advice opportunity for your clients to maximise their after-tax contributions including a recontribution strategy.
Lower income clients earning at least 10% of assessable income from an employment source may be eligible for a Government co-contribution of up to $500 if they make at least a $1,000 voluntary after-tax super contribution. In 2021/22, the maximum co-contribution is available to clients earning less than $41,112, with a lower amount of Government co-contribution (on a sliding scale) up to earnings of $56,112 per annum. This may provide an advice opportunity and strategy for lower income clients who are looking to accumulate more inside super and partly subsidise the cost of premiums for insurance held inside super.
Clients may wish to split some of their eligible concessional contributions from the 2020/21 financial year to their spouse’s super. Utilising this spouse split contribution strategy may allow coupled clients to manage their combined Transfer Balance Cap as they near retirement, fund insurance inside super for the receiving spouse, and/or provide increased Age Pension entitlements for the member of the couple who is of pension age and is asset tested. Please refer to the ATO for the contribution splitting rules and eligibility criteria.
These are some of the advice opportunities and contribution strategies you could discuss with clients well before 30 June 2022 and beyond. If you would like further information about these or any other strategies, please contact the TECE team at tece@aia.com.
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