This Federal Budget ticks the boxes and fills the gaps in Government policy from the ‘hard-hat’ 2020/21 Budget (was that really only six months ago?).
- Stimulus that is directed at improving employment for women
- A positive response to some issues raised by the Royal Commission into Aged Care Quality and Safety
- Additional funding to the health sector to support mental health
- A projected unemployment rate of less than 5%
On the superannuation side there is a definite feel of a Budget that aims to clean up some out-of-date rules and restrictions that no longer have a place in super and retirement. Note, however, that the following will not commence until 1 July 2022:
- The minimum monthly income threshold of $450 before super guarantee contributions are payable by employers will be abolished. The Retirement Income Review acknowledged that there was universal support for removing this threshold across all sectors of the industry. It unfairly penalises low income workers (63% of whom are women) and its original purpose of creating employer administrative efficiency is no longer relevant given SuperStream and Single Touch Payroll exist.
- The work test to make non-concessional contributions by those aged 67 to age 74 will be abolished. Some sort of work test will be required to claim a tax deduction for personal contributions over age 67. This is a sensible move that will fix some of the more convoluted rules in super. Removing the work test should be relatively easy for the Government.
- The age for making downsizer contributions will be reduced to age 60. This is to encourage empty nesters to sell their houses earlier, to increase housing stock for families. The advantage of downsizer contributions is that they are not counted under the non-concessional contributions cap, so a couple can sell their home and make a downsizer contribution of $300,000 each into super.
- SMSFs and Small APRA Funds with old complying pensions (including term allocated or market-linked pensions) will be able to exit these. For some SMSFs the cost of running these pensions (such as actuarial costs) has been more than the actual pension they receive. This will also extend to APRA funds with old complying pensions. Additionally, the residency rules for SMSFs will be relaxed so that members can be non-residents for five years before this will affect the SMSF.
It is also important to take note of super issues NOT addressed in the Budget:
- Despite an earlier push from the Coalition backbench, the super guarantee will increase to 10% from 1 July 2021.
- With financial markets bouncing back over the last year, the account-based pension minimums will return to normal from 1 July 2021.