My top 10 highlights from the federal budget
Last night’s federal budget is a far cry from the pre-COVID budgets of this government. They were all about paying down debt. This budget is about spending our way out of the COVID crisis, with very little regard for the growing debt and deficit, obviously until unemployment is under control.
There were a few highlights for me, most of them around superannuation:
Repeal of the work test: Currently, Australians aged 67 – 74 must satisfy a work test (or the work test exemption) to be eligible to make super contributions. The work test will no longer apply when making non-concessional super contributions or salary sacrificed contributions. People in this age group will also be able to access the non-concessional bring-forward arrangement, subject to meeting the relevant eligibility criteria.
Downsizer contributions age reduced: The age at which people are eligible to make a downsizer contribution will reduce from 65 to 60. This will allow an after-tax contribution of up to $300,000 per person when they sell their family home.
Removal of minimum income threshold for super guarantee: The budget removes the current $450 per month minimum income threshold under which employees do not have superannuation guarantee paid by their employer. The government says that around 300,000 individuals will receive additional super guarantee payments, 63% of whom are women.
Access to lump sums under the Pension Loan Scheme: The PLS is a voluntary, reverse mortgage type loan provided by the government. It is designed to assist older Australians to boost their retirement income by unlocking equity in their property. Through the PLS, people can receive regular fortnightly payments with the payments accruing as a debt secured against their property. A new option is to receive up to two lump sums of up to 50% of the Age Pension in a 12-month period. The maximum lump sum amount will depend on whether the individual is single or part of a couple.
Family Home Guarantee for single parents: The government has introduced the Family Home Guarantee as a way of providing a pathway to home ownership to support single parents with dependants. This is regardless of whether they are a first home buyer or a previous owner-occupier. From 1 July, 10,000 guarantees will be made available over four years to eligible single parents with a deposit of as little as 2%, subject to an individual’s ability to service a loan.
New Home Guarantee: The government is providing a further 10,000 places under the New Home Guarantee in 2021/22. This is specifically for first home buyers seeking to build a new home or purchase a newly built home with a deposit of as little as 5%.
Extension of tax offset: The Low and Middle-Income Tax Offset (LMITO), worth up to $1,080, has been extended for an additional 12 months to cover the 2021/22 financial year. LMITO will be received once individuals lodge their tax return for the 2021/22 financial year.
Temporary full expensing: The temporary investment tax incentive announced in last year’s Budget has been extended for a further 12 months until 30 June 2023 giving businesses additional time to utilise the incentive and including for projects requiring longer planning times. Businesses with a turnover up to $5 billion will be able to deduct the full cost of any eligible asset they purchase for their business, including the cost of improvements to existing assets, until 30 June 2023.
Temporary loss carry-back provision: Companies will now be permitted to carry back tax losses for an extra 12 months from the 2019/20, 2020/21, 2021/22, and now 2022/23 income years to offset previously taxed profits in 2018/19 or later income years. This too applies to businesses with an aggregated turnover of less than $5 billion.
Response to the Royal Commission into Aged Care Quality and Safety: The government announced an additional $17.7 billion over five years for aged care. Some of the proposals include: 80,000 additional Home Care Packages over the next two years; introducing a new star rating to allow Aged Care recipients and their families to compare Aged Care providers on performance, quality and safety; implementing a new funding model; increasing the government’s Basic Daily Fee supplement by $10 per day per resident; and from early 2022, informal carers and older Australians will benefit from increased funding to improve access to respite care and support through the government’s Carer Gateway.