What you need to know about the 2021-22 Federal Budget
This week, the Government delivered the 2021-22 Federal Budget. The focus of this year’s budget is on initiatives designed to maintain and grow Australia’s post-pandemic economic recovery.*
We’ve summarised these and some other key budget updates that could benefit you, such as changes to super, income tax cuts and support for economic growth, health care, and women.
Changes to super
The below changes will help more Australians get to their future financial goals. These changes are proposed to take effect from 1 July 2022.
Super for everyone
Currently you need to earn more than $450 (before-tax) in a calendar month to be eligible for super guarantee (SG) contributions. The government has proposed removing this threshold.
The $450 monthly threshold prevents an estimated 300,000 low-paid workers, 63% of whom are female, from receiving mandatory employer super contributions. The removal of this threshold will ensure more workers are paid super.
New incentives for home buyers
Aussies looking to enter the housing market can now take more money out of their super to go towards a home deposit.
Under the proposed changes, the amount that can be released under the First Home Super Saver Scheme will increase from $30,000 to $50,000.
For couples, both individuals will be able to utilise their caps up to a maximum of $100,000.
Learn more about the First Home Super Saver Scheme.
Additionally, the Government is providing a further 10,000 places under the New Home Guarantee in 2021/22. This is specifically for first-home buyers who’d like to build a new home or purchase a newly built home with a deposit of as little as 5%.
No more work test for those aged 67 to 74 years
The budget will also abolish the work test, meaning those aged 67 to 74 will no longer be required to meet the work test when making, or receiving, non-concessional super contributions or salary sacrificed contributions.
Additionally, the Government said those in the 67-to-74 age bracket will be able to access the non-concessional bring-forward arrangement.
Transfer of superannuation to the KiwiSaver Scheme
The Government will provide $11 million over four years from 2021/22 (and $1 million per year ongoing) to the Australian Taxation Office (ATO) to administer the transfer of unclaimed super money directly to KiwiSaver accounts (the New Zealand equivalent of Australian super funds).
Changes for retirees
The current age for Aussies wanting to make a downsizer contribution is 65. From July 1 2022 the new proposed age is 60. Australians will be able to make a one-off, post-tax contribution of up to $300,000 per person (or $600,000 per couple) to their super when they sell their home.
These contributions are (mostly) exempt from caps placed on super contributions, and the budget papers state the scheme will allow empty-nesters to "consider downsizing to a home that better suits their needs, thereby freeing up the stock of larger homes for younger families”
Learn more about the downsizer contribution scheme.
Pension Loan Scheme
The Government has tweaked its Pension Loans Scheme (PLS) to allow lump-sum payments. Eligible singles and couples could have almost $20,000 more per year.
This voluntary scheme works like a reverse mortgage and is available to people who claim the Age Pension and self-funded retirees.
Retirees who own their own homes can get their hands on some extra cash each week by borrowing against the value of their property. The balance of the loan is paid when the property is sold.
Those eligible will be able to receive a maximum lump-sum advance payment equal to 50% of the maximum Age Pension - around $12,385 for singles and $18,670 for couples.
Additional key points to support Australians
The Low and Middle-Income Tax Offset (LMITO), worth up to $1,080, has been extended for an additional 12 months to cover the 2021/22 financial year. The offset will be received once individuals lodge their tax return for the 2021/22 financial year.
The budget includes an extra $15.2 billion in infrastructure spending over the decade.
The budget provides the following for the support of women:
- $1.1 billion for supporting victims of violence, including financial and legal help and emergency accommodation
- $20.5 million to implement the Respect@Work report by Sex Discrimination Commissioner, Kate Jenkins
- $26.2 million for online safety initiatives
- $1.7 billion extra for childcare, increasing the subsidy for the second and subsequent child
- $38.3 million women's leadership program
- subsidised treatments for certain types of breast cancer.
The following measures to support health care have been proposed:
- $2.3 billion for improved and expanded mental health care and suicide prevention
- a mental health plan that includes new adult mental health centres, Medicare listings, suicide prevention services and workforce improvements
- a further $1.9 billion investment in the vaccine rollout, expanding the number of doses on order to 170 million
- an investigation into local production of mRNA vaccines
- the introduction of a patent box, giving a tax break for income derived from Australian patents in the medical and biotechnology sectors.
Budget changes to aged care include:
- $17.7 billion to fund aged care reforms
- a new funding model to start in October 2022
- 80,000 extra home care packages
- an extra 33,800 training places to boost the aged care workforce.
The Government announced a $243.6 million Indigenous budget to boost skills and jobs programs and improve access to government services in remote areas.
Further information about 2021-22 Federal Budget can be found in the Treasury budget fact sheets.
* It’s important to remember that the budget measures outlined need to be legislated before they come into effect. The same applies to the package of super measures announced in last year’s mid-pandemic October budget which remain in Parliament and are still subject to debate.
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