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More Flexible Superannuation Bill - passed with benefits
Another Government superannuation reform has now been accepted by the Senate. The Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 has now been passed by the Senate (after adding further beneficial changes).
As part of the 2019 Budget the Government proposed amending the tax law to allow individuals aged 66 and 67 to make up to three years of non-concessional contributions under the “bring forward” rule. Previously only individuals aged 65 or less could use the "bring-forward" rule. This change applies from 1 July 2020.
The Senate has modified the Bill (and the House of Representative have agreed to those modifications) to allow amounts withdrawn from super accounts under the Covid-19 measures to be recontributed to super.
The Covid-19 re-contribution measure will apply in respect of the 2021/22 financial year and will cease to apply in respect of the 2029/30 financial year. This measure will permit individuals who have made Covid-19 withdrawals in 2019/20 and 2020/21 financial years to return all or part of those withdrawals (Covid-19 re-contribution) to the super system.
Importantly, there is no requirement that the Covid-19 re-contribution be made to the superannuation fund from which they were originally paid. Also, you cannot claim a tax deduction for the Covid-19 re-contribution. The Covid-19 re-contribution will not be counted as a non-concessional contribution and so, will not be affected by the non-concessional contribution cap.
More importantly, the source of money used to finance the Covid-19 re-contribution is irrelevant. Possibly a parent could provide cash to their child who has made a Covid-19 withdrawal for the child to make the Covid-19 re-contribution.
The legislation does not address the application of the SIS contribution acceptance rules to the Covid-19 re-contribution. Possibly the Government will amend those rules to permit superannuation funds to accept such re-contributions irrespective of the work test status of the contributor. Or possibly, the Government considers that anyone who made a Covid-19 withdrawal would have been under age 60 (otherwise they could have accessed their super by means of a transition to retirement pension) and so will most likely be under age 67 by 30 June 2030.
Most likely the Government will amend the SIS contribution acceptance rules to expressly exclude "Covid-19 re-contributions" from the operation of those rules much as “downsizer contributions” are expressly excluded.
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