May 2021 Newsletter
What's in the 2021 Federal Budget For You?
Last night the Australian government announced its initiatives for the next year and the list is long and beneficial for many, many people. As a result, the government is rapidly going further into a lot more debt.
Among the few people not benefiting from this budget are those who are retired, get the full age pension, pay no tax and are not eligible for aged care support. Otherwise there seems to be something for everyone.
For those aged 60 - 64:
The downsizer contribution minimum age will be reduced from age 65 to age 60, probably from 1 July 2022 (next year). This means a couple can add $600,000 to their super when they sell their home (there are a number of conditions) without those $600,000 counting towards any other superannuation contribution limits. This is good news for those who want to put money into their super so it can be in a tax-free or tax-reduced environment.
For those aged 67-74:
You can now add after-tax contributions to super without passing the work test, i.e. even when you are fully retired. The work test still applies for tax deductible contributions, which is fair enough. (The work test is that you will need to have worked 40 hours in any 30-day period during the financial year where you make tax deductible contributions – a good way to reduce your tax if you earn more than $37,000 a year).
Your employer will have to pay 10.5% super from 1 July 2022 even if you earn $450 a month or less. That is a good idea. The current system is a bit of a rort for employers.
A big clean-up of old transition to retirement pensions
Old transition to retirement pensions were started because they led to higher age pension payments. If you have a transition to retirement pension (not the new type that is quite different) you now may have two years starting probably from 1 July 2022 to convert the funds into a proper, much more flexible superannuation pension or to take the funds out. This is very helpful for those who now receive the full age pension. It is not quite clear which accounts are eligible for this offer, except that the account definitely needed to have commenced before 20 September 2007.
Childcare subsidies will increase from 1 July 2022
“Under these changes, a family earning $110,000 a year will have the subsidy for their second child increase from 72 to 95 per cent, and would be $95 per week better off for four [10 hour] days of care.”
Pension Loan Scheme more flexible
The Pension Loan Scheme is a boon for those whose home is a big or very big part of their wealth and who plan to stay where they live for the rest of their lives. It is a reverse mortgage paid by the government, i.e. a loan secured by your home that you only pay back when you sell the home or pass away. You can get up to 1.5 times the age pension rate minus whatever age pension you already receive. For example, if you receive the full age pension, you can borrow 50% more through the pension loan scheme. The change is that instead of just fortnightly payments you can have up to two lump sum advances in any 12-month period, giving you more flexibility for renovations, for example.
A lot more money will go into Aged Care
The government pledged to add $17.7 billion over 5 years to improve aged care – this is a lot of money. Currently the government spends $23 billion in aged care per year. This will go up substantially. One example is that a lot more Home Care packages will be released, probably substantially cutting the waiting periods for Level 3 and 4 (the higher paying) packages. The actual numbers are 80,000 extra care packages for a waiting list of 100,000 (though the true waiting list is considered to be shorter).
Low-income tax offset – an extra $1,000 once you submit your tax return
This measure will have accountants groaning as so many people will again submit their tax return as soon as possible which means much more work for accountants than normal from mid-July onwards. If your taxable income is between $48,000 and $90,000 you will get an extra $1,080 back from the taxes you paid. If you earn between $37,000 and $126,000 you will receive at least a part of these $1,080.
Lots of benefits for businesses, funding for apprentices and for employers to hire those without work
Businesses with a turnover below $5 billion will have much more ability to reduce their taxes or even get previously paid tax back if they make a loss. Lots of financial help in hiring and training apprentices. Also lots of financial help to hire new employees. Recovery loans for small businesses that either received Jobkeeper or are in a 2021 flood disaster area.
Big boost for NDIS (National Disability Insurance Scheme)
One of the largest spendings will be an extra $13.2 billion over four years for Australians with disability. This means that many of those who are disabled will have a substantial amount of money to pay for a large range of services. This is also a large financial boon for a lot of people who are physically fit but don’t have many workplace skills as being an NDIS support worker can pay very well.
And this list is in no way exhaustive with plenty more on offer. I have seen nothing like this in the 37 years I have been in Australia. These measures will certainly increase economic activity.
There is a lot to look forward to in the next financial year especially with the support of a great financial adviser!
As always you are very welcome to contact us any time – we love hearing from you.
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