What to expect in 2021 – changes you need to know

By Stuart Sheary, Senior Technical Manager

Need a quick a refresher on recent and upcoming changes? The following rundown may help bring you up to speed on key technical developments for 2021.

Superannuation

Will the extension of the bring-forward rule become legislated?

The Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 seeks to extend the maximum age the bring forward rule can be triggered to age 66. The next time the Bill can be passed is when the Senate sits in February 2021. Under current law only clients who were age 64 or less at 1 July of the current financial year can trigger the bring forward rule subject to their total super balance. Click here for a link to the Bill.

Transfer balance cap to be indexed on 1 July 2021

The ATO have communicated on their website that the general transfer balance cap will increase to $1,700,000 on 1 July 2021. The general transfer balance cap is currently $1,600,000. This increase will have several implications which are outlined in ‘What the increased general transfer balance cap means for your clients ’. Click here to read the article.

Will contribution caps be increased due to indexation?

Subject to AWOTE indexation figures to be released, the super contribution caps, may be indexed upwards on 1 July 2021.

Some points to remember:

The concessional cap is indexed in $2,500 increments (rounded down) subject to Average weekly ordinary time earnings figures

  • This means the next increase will be to $27,500

The non-concessional contribution cap is equal to 4 times the concessional cap

  • This means the next increase will be to $110,000 and the under the bring forward rule $330,000

We will keep you informed when the ATO confirm the indexation arrangements for the caps mentioned above.

Social Security

$150 Coronavirus Supplement ends on 31 March 2021

The coronavirus supplement paid in addition to JobSeeker Payment (and certain other Centrelink payments) was scheduled to end on 31 December 2020 but is now extended to 31 March 2021. The amount paid has been reduced to $150 per fortnight. This means the maximum JobSeeker Payment (including coronavirus supplement) is now $715.70 per fortnight (single, no children).

Without the coronavirus supplement and subject to any indexation, the maximum JobSeeker Payment will reduce to $565.70 per fortnight from 1 April 2021.

JobSeeker Payment income free threshold and taper rate

Generally, the JobSeeker Payment will be reduced by 60 cents for every dollar of income above $300 per fortnight. Prior to 25 September 2020, the JobSeeker Payment income free area was generally $106 per fortnight, with a phase out at 50 cents in the dollar for income between $106 and $256 then reducing by 60 cents in the dollar thereafter.

Income tested JobSeeker Payment recipients can expect less JobSeeker payment from 1 April 2021.

JobSeeker Payment partner income free threshold and taper rate

Generally, the JobSeeker Payment currently reduces by 27 cents for every dollar a partner earns over $1,165 per fortnight. No JobSeeker Payment is available if your partner earns more than $3,086 per fortnight.

Prior to the COVID-19 measures, the partner income free area was $996 per fortnight (assuming partner is aged 22 or over). For every dollar of income received by the partner in excess of $996 per fortnight income was reduced by 60 cents in the dollar. As an indication if thresholds were to revert to pre COVID-19 measures, the cut out would reduce from $3,086 per fortnight ($80,236 pa) to $1,903 per fortnight ($49,748 pa). Note different thresholds apply if the partner is also receiving a pension.

Partnered JobSeeker Payment recipients may have their JobSeeker Payment reduced from 1 April 2021.

JobKeeper Payment

The JobKeeper rate reduced from 4 January 2021 and will end on 28 March 2021.  Eligible employees who have worked 20 hours or more in the relevant period may be eligible for $1,000 per fortnight (before tax) and employees who have worked less than 20 hours per week eligible for $650 per fortnight (before tax).

Grandfathered commissions

An end of conflicted remuneration

From 1 January 2021, grandfathered commissions will be rebated to affected clients. For further information please see ASIC’s Regulatory guide 246 as well as our Tech Bulletin.

Further changes likely in first half of 2021

The Government’s response to the Retirement Income Review and anticipated May Federal Budget will likely bring fresh changes to consider.

More information

If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.

Disclaimer
The information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.