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The Treasurer, Josh Frydenberg, has delivered a second ‘pandemic’ budget that focuses on key spending measures to drive Australia’s economic recovery. This morning I sat down to reflect and highlight the key takeaways that will impact and assist our clients.
The budget position was improved significantly from the forecasts delivered in October 2020. The 2020-21 deficit is now expected to be $161 billion, down from $213.7 billion. This reduction is largely due to a much stronger rebound in employment than expected.
The Budget’s focus is firmly on getting Australia through the pandemic and promoting economic growth and employment. Based on the Treasurer’s comments last night, he made it clear that there are still downside risks to the economy, and he expects the Government to continue providing significant support.
Some of the key measures announced are summarised as follows:
Personal income tax rates remain unchanged from those announced in the 2020-21 budget which brought forward the second stage of the Governments personal income tax plan by two years to 1 July 2020. Stage three of the plan is unchanged and scheduled to commence in 2024-25.
The Government announced it was extending the 2020-21 COVID 19 package for small businesses for a further year. The following two measures, in particular, will be extended:
Temporary Full Expensing Extension
This will be extended to 30 June 2023 which allows businesses with aggregate turnover or total income of less than $5billion to completely expense depreciable assets in the current tax year.
Temporary Loss Carry-back Extension
This allows companies to claim back tax paid in prior financial years back to 2018-19 where a tax loss occurs until the end of the 2023 financial year.
The Government announced several changes to enhance the attractiveness of super, particularly for older Australians.
From 1 July 2021, the super guarantee contribution will increase from 9.5% to 10%. This is a very small change, and we believe that this would not assist in the current pressure to accumulate super towards a self-funded retirement.
The Government will remove the $450 per month limit before employers must pay super guaranteed contributions. This means that all workers (those who have sporadic or casual work patterns) will be entitled to super contributions no matter how much they’re earning each month. This measure is expected to boost super savings of lower-income Australians (63% of whom are women) however will also lead to a reduction in take-home pay under most circumstances.
A significant change announced last night is the removal of the work test for those wishing to put additional money into super up to the age of 75. This only applies to non-concessional (after-tax) contributions and salary sacrifice contributions. For those hoping to put personal deductible contributions, a work test must be satisfied (work 40 days over a 30 consecutive day period). This will apply from 1 July 2022. Those accessing these new rules will also be able to use the bring-forward arrangements to contribute up to $330,000 into super if they are under 75 years of age.
|Concessional Contributions||$27,500 per financial year|
|Non-Concessional Contributions||$110,000 per financial year|
(or $330,000 using the bring-forward rule)
|Total Super Cap||$1.7million|
Great news for those looking to downsize their home – the Government also increased access to the Downsizer Contribution regime.
From 1 July 2022, those who are 60 and over can contribute up to $300,000 (per person) into super from the sale of their home.
This will enable people to accumulate more in super to fund retirement while releasing larger homes to the market for families. This contribution does not count towards the non-concessional cap stated above.
The Government will invest a total of $17.7billion in aged care reform over the next 5 years. This significant expenditure allowance is aimed at reducing the poor practices highlighted by the recent Royal commission report.
The additional funding will not at this stage impact the way in which individuals pay towards the cost of aged care but should increase the funding available to aged care operators to ensure appropriate levels of care are provided.
The biggest change that will have an impact on older Australians has been the increase in funding for home care packages. This will enable more people to remain in their own homes with appropriate levels of support as they age.
Overall, we are very positive about the measures announced by the Government and look forward to continued growth in Australia and our economy through what has been one of the world’s greatest challenges in dealing with the COVID-19 pandemic.
If you would like to speak to your Financial Adviser about the recent retirement changes or how the Budget impacts you, happy to discuss and answer any questions you may have.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email email@example.com or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.