How Superannuation Changes in 2021 Affect Australian Expats – There are number of superannuation laws that will be changed from 1 July 2021 and will possibly affect many Australian expats.
From the 1 July, the minimum percentage of Super Guarantee is increasing from the mandated 9.5% to 10%.
Super Guarantee is the minimum contribution that employers are required to make on behalf of their employees.
Further, if you are commencing employment with a new employer on or after 1st November, but have not nominated a superfund, employers are required to complete a super search with the ATO to confirm if an employee has an existing superfund before opening a new fund on their behalf.
Expat Contributions to Super
The Concessional Contribution (CC) cap is increasing from $25,000 p.a. to $27,500 p.a. Concessional Contributions are before tax contribution which includes contributions from employers and personal contributions made by you.
Australian expats are able to claim a tax deduction for personal concessional contributions made during an income year.
The Non-Concessional Contribution (NCC) is also increasing from $100,000 p.a. to $110,000 from 1 July 2021. Non-concessional contributions are contributions made using after-tax savings and are not tax deductible.
In addition, Australian expats under the age of 67 may now trigger the bring-forward rule in 2020-21 financial or a future financial year.
The bring-forward rule allows individuals to bring forward 3 years of non-concessional contributions cap into the one financial year.
What this means is that individuals under the age of 67 can contribute up to $330,000 from 1 July 2021 in a single financial year, subject to their Total Superannuation Balance.
Total Superannuation Balance and Transfer Balance Cap
From 1 July 2017, the non-concessional contribution was accepted by superannuation funds if an individual’s Total Superannuation Balance (TSB) was $1.6M on 30 June of the previous income year. From 1 July 2021, this is increasing to $1.7M.
Similarly, to the TSB threshold, the Transfer Balance Cap (TBC) is also increasing from $1.6M to $1.7M from 1 July 2021. TBC limits the total amount of superannuation that can be transferred into retirement phase pension, where there is no tax on investment earnings.
It is important to note that, the increased cap $1.7M will only apply to individuals who commence a retirement phase income stream for the first time on or after 1 July 2021.
Therefore, if an individual has already commenced a retirement phase income stream prior to this date, their personal TBC will vary between $1.6M and $1.7M.
An Australian expat based in Thailand, Craig, commences an account-based pension (ABP) with $1.6M on 1 August 2019. By 1 August 2021, the balance of Craig’s ABP has fallen to $1.5M and in the meantime, the TBC has been indexed to $1.7M.
Despite Craig’s ABP balance now being $200,000 below the general TBC, he cannot move any further funds into an income stream.
If an individual uses up some of their TBC but has never used it fully, their personal TBC is subject to proportional indexation in line with CPI increases in the general TBC.
Self-Managed Superannuation Funds (SMSF) and SuperStream
From 1 July 2021, the maximum allowable number of people in a new or existing SMSF will increase from four to six people.
In addition, from 1 October 2021, any rollovers into or out of an SMSF must be undertaken via SuperStream.