January 13, 2021 Julie Hyslop

KEY CHANGES TO TAX AND SUPERANNUATION IN 2021

Given that for most of us superannuation provides a pathway to our financial future, providing us with a tax-free income stream for our retirement, it is worth noting key Tax and Superannuation legislation changes that will take place in 2021.

Superannuation Guarantee Increase:
There is a superannuation guarantee increase from 9.5% to 10% effect from 1 July 2021. This is part of a previously legislated increase to 12% by 2025. This superannuation guarantee contribution is what your employer by law is required to pay as part of their legal employment obligation. If you are an employee, there will be an increase in the amount being contributed to your superannuation account. If you are an employer, the increase will need to be factored into your 2021/22 budget.

Your Superannuation will follow you:
Your superannuation follows you from 1 July 2021, when an employee commences with an employer, the employer will pay superannuation benefits to the person’s existing fund (if they have one) or to their nominated fund. Default funds will only be used where a person has no existing super fund and does not choose a fund.
New enterprise agreements and workplace determinations will not be able to prevent employees from exercising a right to choose a superannuation fund. Restrictions in agreements and determinations entered into before 1 January will remain in force.

Minimum Pension Payment:
The 50% reduction in minimum pension payment for the 2020/21 financial year is scheduled to cease at the start of the new financial year on 1 July 2021. The SIS Regulations were amended so that the minimum payments from account based and market linked pensions were halved for the 2019/20 and 2020/21 financial years. Unless the Government decides to extend the reduction in minimums for 2021/22, the minimum payments will revert to their usual rates. Note: After the GFC, during which the minimums were reduced by 50% for three years, the minimum rates did not immediately revert to their usual levels but were set at 75% for a further two years.

The Low- and Middle-Income Tax Offset:
The Low- and Middle-Income Tax Offset (LMITO) will cease from 1 July 2021. LMITO is not included in PAYG withholding schedules. Instead, it is calculated by the ATO when the person’s tax return is submitted. This means the cashflow effect will be delayed for 12 months, such as through lower a tax refund, additional tax payable or adjustments to PAYG instalments.

The above points are just a few of the key changes to Tax and Superannuation legislation for 2021 and beyond, and for a more detailed and comprehensive analysis of recent legislative changes please contact your adviser who will be able to assist you by providing details on how these changes may affect you.

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