How the 2021-22 Federal Budget will affect your super

The 2021-22 Federal Budget was recently announced. Here’s a brief summary of the proposed changes that may affect your super from 1 July 2022.*

Quick overview

Proposed Changes for Workers Proposed Changes for Retirees
  • Removal of $450 monthly income theshold for super contributions
  • Higher withdrawal limit for First Home Super Saver Scheme
  • Removal of work test for those aged between 67 and 74
  • Transfer of unclaimed super to KiwiSaver accounts
  • Lower age threshold for super downsizer scheme
  • Legacy product conversions
  • Increased felxibility for the Pension Loans Scheme


Proposed Changes for Workers


Removal of $450 monthly income threshold

The $450 monthly income threshold prevents an estimated 300,000 workers, 63% of whom are female, from receiving mandatory employer super contributions. The removal of this threshold will help these workers boost their retirement savings.


Higher withdrawal limit for First Home Super Saver Scheme

The withdrawal limit for the First Home Super Saver Scheme will increase to a maximum cap of $50,000 per person. Where there is a couple involved, both individuals will be able to utilise their caps up to a combined maximum of $100,000.

This scheme allows aspiring first home buyers to make voluntary contributions to superannuation in order to save for their first home. At present these contributions are capped at $15,000 a year and $30,000 in total.

It’s important to note that this scheme relates to voluntary contributions only. First home buyers cannot withdraw any part of their compulsory super savings (i.e. super contributions made on their behalf by their employer). Further information about the scheme is available on the Australian Taxation Office (ATO) website.


Removal of work test for those aged between 67 and 74 years

The budget will also abolish the work test, which requires those aged between 67 and 74 to be gainfully employed for at least 40 hours over 30 consecutive days during the financial year before concessional or non-concessional superannuation contributions can be made.

This will allow individuals aged 67 to 74 years to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution caps.

Individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions.


Transfer of superannuation to the KiwiSaver accounts

The Government will provide additional funding to the ATO so that they can administer the transfer of unclaimed superannuation money directly to KiwiSaver accounts (the New Zealand equivalent of Australian superannuation funds).


Proposed Changes for Retirees


Lower age threshold for downsizer scheme

Retirees who downsize their family home and meet the eligibility criteria, will be able to make a downsizer contribution to their super from age 60, down from the current age of 65.

This scheme allows individuals to contribute $300,000 ($600,000 for couples) into their superannuation using the proceeds from the sale of their home. The ATO website has further information about this contribution type.


Legacy product conversions

A two-year period will be provided for conversion of market-linked, life-expectancy and lifetime pension and annuity products. Importantly, it will not be compulsory for individuals to take part.

Retirees with these products, who choose to, will be able completely exit these products by fully commuting the product and transferring the underlying capital, including any reserves, back into a superannuation fund account, that is in the accumulation phase. From there they can decide to commence a new retirement product, take a lump sum benefit, or retain the funds in that account.

Any commuted reserves  will not be counted towards an individual’s concessional contribution cap and will not trigger excess contributions. Instead, they will be taxed as an assessable contribution of the fund (with a 15 per cent tax rate), recognising the prior concessional tax treatment received when the reserve was accumulated and held to pay a pension.

The following products will be covered: Market-linked, life-expectancy and lifetime products which were first commenced prior to 20 September 2007 from any provider, including self-managed superannuation funds (SMSFs).

These products will not be covered: Flexi-pension products offered by any provider, and lifetime products, offered by a large APRA-regulated defined benefit schemes or public sector defined benefit schemes, will not be included.


Increased flexibility for the Pension Loans Scheme

The flexibility of the Pension Loans Scheme (PLS) is being improved. Participants will be able to access advance payments up to 26 fortnights’ worth of top-up payments as a lump sum. This will provide immediate access to lump sums of around $12,000 for singles, and $18,000 for couples.

A No Negative Equity Guarantee will also be introduced. This means that borrowers under the PLS, or their estate, will not owe more than the market value of their property, in the rare circumstances where their accrued PLS debt exceeds their property value. This brings the PLS in line with private sector reverse mortgages.

Further information about this scheme is available on the Services Australia website.



Feel  free to contact our Member Care Team who are here to assist you with any questions you might have about your account and the Federal Budget changes.

* Federal Budget announcements above are proposed changes only. These proposals won’t become law until they are passed in Parliament. If you ’re unsure about how these proposed changes may affect you, please speak with your financial planner.