This year’s Federal Budget was announced on Tuesday 2nd April. An ‘election budget’ with future…
2021/22 Federal Budget – Bigger and Better Superannuation
During the 2021/22 Federal Budget announcement Treasurer Josh Frydenberg stated, “Australia is back!”. The Budget proposes positive changes to superannuation, an extension of the low- and middle-income tax offsets and a boost to aged care services.
The Federal Budget has included a raft of changes to superannuation which will make it a little easier to put more money into super and help Australians build wealth to fund their retirement. Each of the measures are details below:
Superannuation Thresholds from 1 July – 30 June 2022 (Changes Only)
|Transfer Balance||$1.7 million|
|Concessional Contribution Cap||$27,500|
|Non-concessional Contribution||$110,000 or $330,000 over 3 years|
|Untaxed Plan cap||$1,615,000|
|Account based pension payments||Return to default payment levels|
|Maximum Super Contribution Base||$58,920 (per quarter)|
|Government Co-contribution ($500)
|Lower income threshold – $41,112
Upper income threshold – $56,112
From 1 July 2022, the government will reduce the eligibility age to make a ‘downsizer contribution’ from 65 to 60. Downsizer super contributions allows you to contribute a maximum of $300,000 (for each eligible member of a couple) to super up to the total proceeds from the sale of your home.
Removing the Work Test
The Government will allow individuals aged 67 to 74 years (inclusive) 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.
Superannuation for Low Income Earners
From 1 July 2022, if you receive employment income of less than $450 per month your employer will now be required to pay you the superannuation guarantee (SG). The Retirement Income Review estimates that, approximately 300,000 additional people will receive superannuation guarantee payments each month, of whom 63% are women.
Legacy Retirement Product Conversion
The Government will allow individuals to exit a range of legacy retirement products for a period of two years (expected to commence from 1 July 2022). This will include market-linked, life-expectancy and lifetime products including SMSF. This measure will allow people to shift into a more contemporary retirement product. It should be noted that social security and taxation treatment will not be grandfathered for any new products commenced with commuted funds and the commuted reserves will be taxed as an assessable contribution. This measure will also not be made available on flexi-pension products or a lifetime product in a large APRA regulated or public sector defined benefit schemes.
Relaxing Residency requirements for SMSF
The Government will relax residency requirements for SMSF and small APRA-regulated funds from 1
July 2022 by extending the central control and management test safe harbour from two to five years, and removing the active member test. This measure will allow SMSF and SAF members to continue to contribute to their superannuation fund whilst temporarily overseas, ensuring parity with members of large APRA-regulated funds.
Changes to the First Home Super Saver Scheme (FHSSS)
From 1 July 2022, if you’re a first home buyer you can release up to $50,000 (up from $30,000) from your voluntary super contributions to help you buy your first home. This means all voluntary contributions made from 1 July 2017 up to the existing limit of $15,000 per year will count towards the total amount able to be released.
The Government has also announced some minor amendments to the administration of the FHSSS to provide additional flexibility to the recipient and the ATO to make amendments to their application and withdrawal amount allowing an increase or decrease of the applied amount prior to a payment being made with no penalty to the recipient.
Low- and Middle-Income Tax Offset (LMITO)
The low- and middle-income tax offset (LMITO) is proposed to be extended for the 2021/22 financial year. The LMITO provides a tax offset of up to $1,080 for individuals or $2,160 for a couple. The maximum tax offset of $1,080 is available to you if you have a taxable income between $48,000 and $90,000 per annum. See the table in the next column for offset amounts based on your taxable income.
|$37,000 or less||$255|
|Between $37,001 and $48,000||$255 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,080|
|Between $48,001 and $90,000||$1,080|
|Between $90,001 and $126,000||$1,080 minus 3 cents for every dollar of the amount above $90,000|
Improving Aged Care
The Government’s response to the Royal Commission into Aged Care Quality and Safety is a reform based on an additional $17.7 billion in a ‘five year – five pillar’ plan addressing:
- Home care – an additional 80,000 Home Care Packages will be released over two years.
- Support to aged care providers to deliver better care and services, including food, through a new government-funded basic daily fee supplement of $10 per resident per day.
- Introduction of a new star rating system to highlight the quality of aged care services.
- Workforce – $652.1 million to grow a bigger, more highly skilled, caring and values-based
- workforce including training and recruitment changes.
- Governance – $698.3 million to improve the governance across the aged care system including a new Aged Care Act by mid-2023, and the establishment of a National Aged Care Advisory Council, and a Council of Elders, and to work towards establishment of an office of the Inspector-General of Aged Care. A focus will be on improving access to quality aged care services for consumer in regional, rural, and remote areas.
Call Elliot Watson Financial Planning on 02 4038 1623 and make an appointment to speak to an adviser today to discuss how the proposed federal budget changes could impact you.
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