As the resident nerd here at Wealthtree, I love a good Budget.
It feels like no time ago when I sat right here, soaking in the long-awaited Federal Budget for 2020.
Yet, here we are again.
Firstly, let’s forget about the deficit for a minute and talk about how the Government is planning to invest in our welfare.
There is a $2.7 billion financial commitment to youth employment and training. 170,000 apprenticeships, 250,000 more jobs and 30,000 funded Australian University positions will provide amazing opportunities for our young people. This smart move will allow the Government to sit back and watch the main success of those initiatives, the young people themselves, filter money back into the economy for many years to come.
$14.2 billion dollars of extra spend will go towards the 450,000 people receiving disability support over the next five years, with 80,000 extra Home Care Packages available. $2.3 billion will be directed towards the improvement of mental health in the community, with a strong focus on suicide prevention. $1.1 billion will be invested in Women’s safety, including counselling and accommodation.
I know there are concerns that all of this, along with another $15 billion to be spent on Infrastructure, will create further issues with that deficit we weren’t supposed to talk about; but let’s face it, the people will always be more important than the numbers.
The ‘Standard’ Super Changes
Everyone knows I am all about super, I will talk until I am blue in the face about the need for Australians to put more thought into their super arrangements earlier in life. This is not just because I am Adviser and I am passionate about my job, it is because our opportunities to make the most of our super are limited, and most people don’t realise that until it is too late.
A lot of clients come to me for retirement advice between the ages of 65 and 70. It is often my first chance to go full bore into training mode at this time. Why is super a better investment than cash? What are the tax benefits? How does Centrelink assess super? All that good stuff.
The problem is that my clients between 67 and 74 have had to be employed for at least 40 hours over a period of 30 days to be able to make post tax contributions to super. Unfortunately, most have left work or are doing minimal hours at that point. The good news is that work test will be removed from July 2022.
One of the only ways we could get around that rule in the past was if a client were downsizing their property, they could then contribute up to $300,000 from the sale proceeds to their super policy. The Downsizer contribution has been restricted to people aged over 65, but will now be extended to people over 60, from July 2022.
Another major change is the removal of the $450 per month minimum income threshold for super contributions. This will mean that many individuals with casual jobs/low incomes will be eligible for mandatory employer contributions for the first time from next financial year.
The final big change on the super side effects a piece of legislation that I am not the greatest supporter of; The First Home Super Saver Scheme. This scheme allows individuals to make voluntary contributions of up to $15,000 per year and then release up to $30,000 plus investment earnings to buy a home. The maximum withdrawal will now be increased from $30,000 to $50,000, with no change to the voluntary contribution/ savings amount.
I have to say I am not a huge fan of using super to save for pre-retirement expenses and I would have been much happier to witness the announcement of last year’s proposed increase to employer (SGC) contributions, from 9.5% to 10%, but you can’t win them all.
The Self Managed Superannuation Changes
I can almost hear some of my clients sighing with relief (or pain) when they read these words. The Central Management and Control rules within the SMSF space are becoming more lenient.
For those who need to be temporarily absent from Australia ie. Live or work overseas for a length of time, this will mean that their SMSF may remain open without the huge tax consequences currently imposed on non-resident Trustees. The ‘safe harbour’ will be extended for a period of 5 years, rather than 2 and the ‘active member test’ will be removed next year.
From a tax perspective, we will see an increase in the Medicare levy low-income threshold and an extension of the low- and middle-income tax offset.
From a loan perspective we will see another 10,000 places for First Home Buyers to enter the market with a 5% Deposit, with similar guarantees for single parents, allowing a deposit of as little as 2%.
Improvements will be made to the Pension Loans Scheme, certain Centrelink Income Support waiting periods will be waived and certain social security payments will increase.
What we wanted to see is certainly what we have been given this time around.
Now that I have had my fix of promises, we’ll reconvene when pen hits paper and we have the legislation in place to turn my nerdy super dreams into a reality.