On Tuesday night, Josh Frydenberg unveiled Australia’s most recent federal budget, and I have to confess that for me, the highlight was the additional assistance announced for micro-breweries.
I’m looking forward to what I expect will be a boom in Western Australia’s craft brewing industry!
Now, for the impact on individuals! The winners look to be first home buyers, low and middle-income earners, along with single parents. Specifically, I see the following budget changes having the biggest impact on our broader client community:
1. Adjustment to downsizer contributions rules
Originally introduced from 1 July 2018, people downsizing their family home can make a one-off contribution of up to $300,000 each to superannuation, outside the regular contribution caps. People with superannuation balances above $1.6m are also able to contribute. When the scheme was first introduced, you had to be over 65 to contribute, but this has been lowered to age 60. This means people will now be able to contribute funds from a home downsize into superannuation sooner.
2. Removal of the ‘work test’ for individuals aged between 67 -74
Under current rules, to be eligible to make voluntary contributions to superannuation after you turn 65, you need to meet what is known as the ‘work test’. Specifically, this is working at least 40 hours within a consecutive 30-day period. The removal of this rule provides greater flexibility for individuals to make voluntary superannuation contributions, particularly for those that have already retired or do volunteer work.
3. Superannuation Guarantee changes
There will now be a requirement for superannuation guarantee contributions (SGC) to be paid to people earning less than $450 per month. This change is aimed to benefit those individuals in part-time and casual employment. Additionally, the superannuation guarantee rate is set to increase to 10 per cent from 1 July 2021. This is in line with previously announced legislation that will eventually see the SGC rate increase to 12 per cent by July 2025.
4. First home buyers
The government’s 5 per cent deposit scheme allowing 10,000 first-home buyers to purchase a new dwelling with a reduced deposit amount is set to continue. Additionally, the amount that can be contributed to superannuation under the First Home Super Saver scheme and used for a first home deposit will increase from $30,000 to $50,000. This is excellent news for those looking to get onto the property ladder for the first time!
5. Working parents with high income
Previously parents earning more than $189,390 per annum had childcare subsidies capped at $10,560 per annum; however, this cap will be removed from 1 July next year. Families with two or more young children will benefit from increased subsidies.
6. Low and middle-income earners
Those individuals earning between $48,000 – $90,000 per annum will benefit from tax offsets, worth up to $1,080. For those earning above $90,000 per annum, these offsets phase out by 3 cents per dollar, cutting out at $126,000 per annum.
7. Temporary loss carry-back extension
The ability for companies to carry-back tax losses to offset previously taxed profits has been extended. This means companies with an aggregated turnover of less than $5 billion will be able to utilise tax losses from the 2022-23 financial year to offset previously taxed profits as far back as the 2018-19 financial year.
This budget certainly hasn’t set the world on fire compared to the changes to superannuation that were announced in the 2016 budget. Still, it should provide an excellent base for Australia’s economic growth as we recover from the impact of Covid-19. Unfortunately, another big takeaway is Frydenberg’s assumption that international travel for Australians is still 12 months away, so holidays at home it is!
If you have any questions or would like to chat about your circumstances, please contact your Capital Partners adviser.