Increases to Super Guarantee (SG) Contributions and Contribution Thresholds
In line with legislation, as of 01 July 2021, many positive increases were introduced in regard to superannuation contributions that are likely to have a significant impact on your retirement savings.
One of the more significant changes has been the increase to the super guarantee rate, moving from 9.50% to 10%. This increase is part of the government’s ongoing long-term plan to raise the super guarantee rate to 12% by 2025. These changes will lead to an increase in the amount of funds being contributed to your super each year by your employer, helping to further build your retirement nest egg.
In line with the above changes, the concessional contributions cap has indexed from $25,000 to $27,500. This may provide scope for some people to further increase their pre-tax contributions each year through salary sacrifice and personal deductible contributions, once again allowing you to increase your savings for retirement and reduce your tax bill.
Along with the increase to the concessional contributions cap, the non-concessional contribution cap has also indexed from $100,000 to $110,000 per annum, allowing those with the available space and funds to further increase their superannuation balance in the lead up to retirement.
A new world for Income Protection Insurance
Due to significant Income Protection claim losses across the insurance industry in recent years, the Australian Prudential Regulation Authority (APRA) have introduced some changes to help maintain the sustainability of the life insurance industry long-term. These changes came into effect on 1st October 2021 and apply to clients seeking new cover.
The key changes include:
- The maximum amount of your income you are able to insure will reduce from 75% to 70%. Some contracts offer additional levels of cover through supplementary options, however, these options are limited to short-term periods only. ie. a 90 % wage replacement for six months.
- Income to be calculated on last 12 months income only, compared to some current policies offering highest 12 months income in the last 2 or 3 years.
- Long benefit periods, such as ‘to age 65’, are to be managed to maintain a motivation to return to work. This may include changing from ‘Own Occupation’ to ‘Any Occupation’ definition after 2 years on claim.
The above changes highlight the importance of reviewing your financial arrangements regularly with the help of a knowledgeable professional. There are many more legislative changes both recently introduced, and in the pipeline, so get in touch today to book an appointment with one of our financial advisers.