2021/22 Budget Update
The Budget for 2021 brings positive changes to superannuation, tax deductions, and minimum pensions, benefiting a wide range of individuals.
The 20201/2022 federal budget has been announced, here are some of the changes and how they might apply to our clients.
First of all it's overall generally good news, the budget is a spending budget, and it doesn't seem to deliver bad news for anybody.
In fact, it delivers good news to many different people in different sectors of the economy. We expect that the economic stimulus from this budget will be positive for both the economy and the underlying share markets as well.
There have been some significant changes to superannuation as a result of the budget. First of all the removal of the work test, people between 67 and 75 currently are required to work a statutory number of hours to be able to contribute to superannuation. That work test has been relaxed for after tax contributions and salary sacrifice contributions from next year. People who are not working will be able to contribute up to age 75 subject to a number of other limitations. These we will look at individually with our clients over the next 12 months if they are eligible for that benefit.
A contribution was introduced a number of years ago, allowing people who'd been in their own home for more than 10 years to sell that home and contribute up to $300,000 per person into superannuation. This was only available to people over 65, and that age will be lowered to people over age 60 from the 1st of July 2022, to apply to a wider range of people who potentially might want to downsize their home
There have also seen changes to the first home savers scheme within superannuation that are probably more applicable to many of our clients' children than our clients themselves. People that are eligible and buying their first home can now withdraw up to $50,000 from their superannuation, as opposed to the previous $30,000 limit.
The government has also removed the minimum earning amount per month to receive a superannuation contribution. This was previously 450 a month, and will now be zero, so anyone earning a wage will be entitled to the superannuation guarantee. The superannuation guarantee currently runs at 9.5% but will increase on the 1st of July to 10%.
For the last two years the minimum pensions have been reduced by half, they will revert back to the normal levels of pension from the 1st of July.
Unrelated to the budget, but coming in from the 1st of July we'll see the amount of tax deductible contributions to super increase from 25 000 to 27 500 and the after-tax contributions increase from 100 to 110 thousand.
From the 1st of July 2021 pension starting balances have been set at 1.6 million dollars by the government. Indexation will be effective from the 1st of July 2021 and will move the start balances for new pensions to 1.7 million dollars
For anyone with an existing pension, there is a pro rata calculation of whether increases are available, and we'll be able to work you through whether or not there is an additional opportunity there. For anyone who hasn’t started a pension, they'll be able to start at 1.7 million total superannuation balance.
We will be seeing an extension of the low to middle income tax offset which has been announced as extended for one more year, so that benefit will continue. These changes are effective from the 1st of July 2021 or after that date so there are no changes that need to be made before the 30th of June this year.
We will continue to worry about your money into the next financial year, so that you have nothing to worry about.
The Budget Highlights
Positive implications of the budget for the economy and share markets
Relaxation of work test for superannuation contributions up to age 75
Lowering of age limit for downsizing home contributions to superannuation to 60
Increase in withdrawal limit for first home savers scheme to $50,000
Removal of minimum earning amount per month for superannuation contributions
Reversion of minimum pension levels back to normal from 1st of July
Extension of low to middle income tax offset for one more year
