During this year’s 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.
We’ve summarised some of the key points from the Budget below but, remember, these are subject to the passing of legislation:
From 1 July 2022, if you’re aged 67 to 74 you will not be required to meet the work test to make non-concessional contributions and salary sacrifice contributions to super. The work test will still be required to make personal deductible contributions to super.
What is the work test?
The work test means you have been gainfully employed for at least 40 hours in 30 consecutive days during the financial year of the contribution.
The announcement also proposed that individuals aged 67 to 74 will also be able to access the non-concessional bring-forward arrangement. This is subject to contribution cap eligibility.
From 1 July 2022, you can make downsizer super contributions if you’re age 60 and over (currently you need to be age 65 or over).
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.
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.
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.
Under the scheme, voluntary concessional and non-concessional contributions made on or after 1 July 2017 may be released from super to help you purchase your first home.
Currently, you can release up to $15,000 of voluntary contributions from any one financial year, up to a total of $30,000 in contributions across all financial years, plus earnings on those voluntary contributions.
Under the proposed changes, you will be able to release up to $15,000 of voluntary contributions from any one financial year, up to a total of $50,000 contributions across all financial years, plus earnings.
From 1 July 2022, if you have a self-managed super fund (SMSF) or small APRA fund (SAF) with old complying pensions (including term allocated or market-linked pensions) you will be able to exit these legacy pensions. For some SMSFs the cost of running these pensions has been more than the actual pension they receive.
Additionally, the residency rules for SMSFs will be relaxed so that you can be a non-resident for up to five years before affecting the SMSF residency rules. The ‘active member test’ will be removed for both SMSFs and SAFs.
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 below 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|
If you are an eligible small or medium business owner, you will be able to deduct the full cost of eligible assets incurred between 7.30pm (AEDT) on 6 October 2020 and 30 June 2023. This was due to end on 30 June 2022.
This applies to businesses with an aggregated annual turnover or total income of up to $5 billion.
The depreciating asset must be:
The temporary loss carry-back has also been extended by one year. This entitles eligible businesses to carry-back tax losses from the 2022/23 financial year to offset previously taxed profits in a prior financial year starting from the 2018/19 financial year through to the 2021/22 financial year.
The Government is proposing to increase the Medicare levy thresholds for singles, families, seniors, and pensioners from 1 July 2020.
The updated thresholds are:
|Not senior or pensioner|
|Seniors and pensioners|
|Plus amount per dependant||$3,533||$3,597|
The Government’s response to the Royal Commission into Aged Care Quality and Safety is a five-year reform plan based on the following five pillars:
Most changes must be legislated and passed through Parliament before they apply. If you think you may be impacted by some of the Budget’s proposed changes, you should consider seeking professional advice. A financial adviser can give you a clear understanding of where you stand and how you can manage your cash flow, super and investments in light of the proposed changes.
For further information, please contact your financial adviser.