Federal Budget 2021/22 – a focus on rebuilding the Australian economy
The Federal Budget 2021/22 was announced on Tuesday 11 May. It included a range of initiatives to support Australia’s post-pandemic economic recovery. Several changes to superannuation and retirement were also announced, most of which were modifications to existing super measures. Many of these changes will have a positive impact on the super savings of low-income earners, women and retirees.
These changes need to be approved by Parliament before they can come into effect. If accepted, most of these measures will commence from 1 July 2022.
Here’s an overview of some of the announcements made in the Budget 2021/22 and how they might affect you and your super.
Changes to super and retirement
- One of the most important and welcomed proposals is the removal of the $450 monthly minimum income threshold for super guarantee (SG) payments - This change will improve the retirement outcomes for low-income earners and help to bridge the gap in retirement savings between men and women.
- First home buyers will be able to release up to $50,000 (up from $30,000) of voluntary super contributions to purchase a home.
- Older Australians will benefit from greater flexibility to contribute up to $300,000 ($600,000 for couples) to superannuation following the sale of their existing home. This scheme has been extended to people aged 60 and over, previously age 65.
- Australians aged 67 to 74 (inclusive) will no longer need to complete a work test before making before-tax (salary sacrifice) or after-tax contributions.
- Retirees will have a temporary 2-year period where they can move out of legacy retirement products including market-linked, life-expectancy and lifetime pension and annuity products, if they choose to. This will only be available if they commenced the product before 20 September 2007. If you’re considering exiting a legacy retirement product, we recommend you seek financial advice.
- Increased subsidisation of childcare for low-and-middle-income earning families.
- A scheme to provide women fleeing family violence with payments of up to $5,000, made up of a $1,500 cash payment and the remainder in goods.
- Additional funding of $11.2 million over 4 years from 1 July 2021, to support better retirement outcomes for super fund members. This includes funding for the Australian Prudential Regulation Authority (APRA) to supervise and enforce increased transparency and accountability for super funds as part of the Government’s Your Future, Your Super reforms.
Other upcoming changes to super
While not part of the Budget announcements, there are some upcoming changes to super that will come into place on 1 July 2021, including:
- SG payments will increase from 9.5% to 10%, gradually increasing to 12% over the next 5 years
- The cap for concessional (before-tax) contributions to super which include employer SG and salary sacrificed contributions and those on which you’ve claimed a tax deduction is increasing to $27,500, up from $25,000
- The cap for non-concessional (after-tax) contributions to super is increasing to $110,000, up from $100,000
- The amount that can be transferred from accumulation to a pension account, known as the transfer balance cap, will be indexed up to $1.7 million for eligible members, up from $1.6 million.^
Your Future, Your Super legislation
In the Federal Budget 2020/21, the Government also announced the Your Future, Your Super legislation which is aimed at improving the super system overall. Although intended to come into effect on 1 July 2021, at the time of publishing, these changes are yet to be legislated. You can read more about the proposed legislation here.
As a CareSuper member, you can be confident that you’re with a fund that has your best interests at heart. We’re consistently ranked as a top performer for investment returns, with our Balanced (MySuper) option returning 8.54% over 10 years to 31 March 2021, well ahead of the industry median of 7.59%.*
You can read more about how we put you at the centre of everything we do in our Member Outcomes Assessment for financial year ended 30 June 2020.
Keeping you up to date
Informing you about changes to super is an important part of what we do, so you can rest assured that we’ll keep you up to date as these changes progress.
If you have any questions in the meantime, you can call us on 1300 360 149, 8am-8pm weekdays. For more on the Federal Budget 2021/22 visit budget.gov.au.
^Indexation of the general transfer balance cap, ato.gov.au, https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/transfer-balance-cap/
*SuperRatings Fund Crediting Rate Survey - SR50 Balanced (60-76) Index, March 2021.