“The economy is coming back. Australia is coming back. And this Budget will ensure we come back even stronger, securing Australia’s recovery.” – Josh Frydenberg, 2021-2022 Federal Budget Speech
In the ever-continuing Pandemic Landscape, Treasurer Josh Frydenberg handed down his third Federal Budget, focussed on key policy topics that the current government believe will lay the framework for Australia’s overall economic recovery and continued stability.
Frydenberg pledged to sustain and even boost some key essential services such as aged-care and child-care. Pressing social issues got a nod with the announcement of measures to address mental health and women’s safety. Proposals for housing affordability and continued tax relief were addressed too, but let’s take a closer look at what’s most relevant for advice professionals and their clients with some wins for superannuation.
Proposed to take effect on July 2022, Repealing the work test for super contributions should give more flexibility for older Australians with 67 to 74-year-olds not having to meet the current work test, enabling non-concessional or salary sacrificed super contributions.
This, of course, should benefit retirees, giving more flexibility in increasing their super balances and needing advice to help implement.
At the same time, Extending access to downsizer contributions is set to begin with the proposal of lowering the age (from 65 to 60) in which Australians can make tax-free contributions to their super with the proceeds of selling their home. While other eligibility rules for downsizer contributions will remain unchanged, pre-retirees and accumulators wanting to increase their super balances may be seeking more advice.
Another proposal to Abolish the $450 per month income threshold for SG means the minimum income threshold of $450 per month will be removed, so all eligible employees will receive SG contributions. The SG rate is increasing to 10% from 1 July 2021 and then gradually to 12% by 2025. This will be major for employees increasing their super balances over time but could be detrimental for pay wage rises in the future as employers will balance this out against the fixed cost increase. Besides updating calculators and future client super balance forecasts, there may be no real impact here for advisers.
Pending the proposal passing law, the Government will give retirees the opportunity to exit legacy retirement products by providing a temporary, two-year opportunity for people to transition from certain legacy retirement products to newer, more flexible products if they choose. Retirees will be able to transfer their capital back into a super account and then be able to start with a new retirement product, take a lump sum or retain the funds in that account. While this will most likely mean additional work for the adviser in changing over existing clients, retirees will have more choice and potentially increase their need for advice.
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