Last night, the Federal Government handed down its Budget for the 2021-22 financial year. As usual, much of its broad content was deliberately ‘leaked’, but the fuller details for clarity were outlined last night. Like the previous ‘special’ budget released last October, last night’s Budget appears to be very well received by economists and the media.
The Budget is a continued ‘cash splash’ fiscal budget to ensure that the momentum of the existing strong economic recovery is maintaining the pull away from last year’s adverse Covid-19 pandemic’s impact. These ongoing aggressive fiscal measures are coupled with the ongoing aggressive monetary policy of ultra-low interest rates and high money supply managed by the RBA.
Attached here is a quick ‘What it means for you’ summary of the Budget, prepared by Challenger Technical Services.
There are several areas touched on by the various policies contained in the Budget. The main area that impacts you, our clients, involves Superannuation. As you can see in the attachment, two key constructive changes to note to superannuation are:
- Repealing the work test for Non-Concessional Contributions (NCC) and Salary Sacrifice Contributions for people aged 67 to 74. This is very positive. Previously, unless you passed the ‘works test’, you were unable to add further NCC (subject to not having reached the NCC limits already).
- Reducing the eligibility age for Downsizer Contributions from age 65 to now age 60. Again, a very positive change as more people can access this opportunity, and more larger family homes should, in theory, become available to the market to help reduce the tight supply to a growing demand for such properties. And the kids may be forced to leave their comfortable home sooner!
- The Downsizer Contribution rule allow people to make a one-off after contribution to super of up to $300,000 from the proceeds of selling their home so long as they have held it for at least 10 years. Under the rules, both members of a couple can make a downsizer’s contributions for the same home, and the contributions do not count to a member’s NCC cap.
So, more opportunities and more time to contribute to your super!
Also, bearing in mind the earlier good news about superannuation, as discussed in my commentary last month, as from 1 July 2021, the new increases in contribution limits available. That is, the annual concessional contributions (CC) limit increases from $25,000 to $27,500; the annual non-concessional contributions (NCC) limit increases from $100,000 to $110,000 (or to $330,000 under the Bring-Forward rule); and the Transfer Balance Cap (TBC) for the maximum amount of super that can be rolled to the tax-free pension phase increases from $1.6mm to $1.7mm.
Of course, there is also the relatively new Carry-forward unused CC cap consideration for individuals who have super balances of < $500,000, can carry forward their unused CC cap for up to five financial years for use in a future financial year.
Speaking about superannuation, do make sure that you, ideally, will have utilised your super contribution capacities for the upcoming financial year (or contact us if you need assistance or clarification on this).
If you have any queries about the Federal Budget’s content or, as always, any queries in general, please do not hesitate to contact us.