Federal Budget 2021-22: Review from a wealth management perspective

About the author:

Terri Bradford
Author name:
By Terri Bradford
Job title:
Director, Wealth Management
Date posted:
11 May 2021, 9:00 PM

Is the 2021 Federal Budget a ‘budget for women & battlers’? Or, as many describe it, ‘the pandemic budget part two’ given the big budget spending announced across various sectors.

The 2021 Budget leaves little doubt the Government is serious about locking in a COVID-19 recovery for Australia.

We summarise the measures that have been proposed in this year's Federal Budget from a Wealth Management perspective below.

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Taxation

  • Extension of the low and middle income tax offset for another financial year.
  • Removal of the exclusion of the first $250 deductions for prescribed courses of education.
  • A review and potential replacement of the individual tax residency rules with a new framework that is easy to understand, based on a primary test of being physically present in Australia for 183 days.

SMSF Residency Requirements

  • The central management and control test will be relaxed from two to five years, and the active member test will be removed making it easier for SMSF members temporarily overseas to still be able to contribute into their SMSF during their absence.

Superannuation

  • Extension of access to the Seniors Downsizer contribution rules to people age 60.
  • Abolishment of the 40-hour work test for non-concessional contributions and salary sacrifice contributions for all relevant individuals up to age 74 (the work test will still apply to deductible personal contributions).
  • Abolishment of the exemption for employers to pay the SG levy where an employee earns less than $450 in a month.
  • Ability for retirees to transition legacy (non-commutable) pensions & annuity products to more flexible and modern retirement products without triggering social security clawback provisions

Social security / Aged care

  • An Aged Care reform package worth just under $18 bn, delivered over a four-year period, focusing on a special workforce initiative to build a more highly trained aged care workforce
  • An additional 80,000 Home Care Packages to be provided.
  • A new No Negative Equity Guarantee to be introduced for Pension Loans Scheme participants to ensure borrowers will not owe more than the market value of their property.
  • The ability for eligible Pension Loans Scheme participants to receive a maximum lump sum advance payment equal to 50% of the maximum Age Pension; including self-fund retirees.

Childcare 

  • A $1.7bn Child Care Package targeted towards low and middle income earners where household income is under $130,000.

Women’s economic security and health

  • A separate “Women’s Budget Statement 2021-22” was also introduced to promote the values of respect, dignity, choice, equality of opportunity and justice for women.

Home ownership

  • Various home ownership incentives including the establishment of a Family Home Guarantee for single parents; an expansion of the New Home Guarantee for a second year for first home buyers; an increase in the maximum amount of voluntary contributions that can be released, to $50,000, under the First Home Super Savers Scheme; and an extension of the HomeBuilder program by a further 18 months.

Small business / SMEs

  • Small business also played a part in this year’s Budget with an extension of tax incentives for temporary full expensing and loss carry-back measures; the ability for SMEs to pause debt recovery actions; modernising Employee Share Schemes; and including various technological incentives as part of the Government’s overall “Modern Digital Economy Strategy”.

Apprenticeship & training

  • The JobTrainer program will also be extended to 31 December 2022 to provide additional training places for school leavers and/or young people who wish to re-skill; and 50% wage subsidies to businesses for newly commencing apprentices. The plan also includes provisions to financial support to upskill aged care workers

Our thoughts

It can be said this is a Budget for battlers and for women, which isn’t a bad thing. Retirees haven’t been forgotten via changes to the Pension Loans Scheme and introducing the ability to transition out of irrelevant market-linked pensions and other non-commutable income stream products.

It is disappointing the Government did not take the opportunity to increase contribution limits or amend the transfer balance cap rules.

As with any Budget announcements, it remains to be seen which incentives are actually legislated or implemented in the coming months and years. We sincerely hope this really is an Australian recovery Budget.

Morgans clients can download our full report for further detail on the wealth measurement measures announced in this year’s Budget:

2021 Federal Budget Review

Find out more

For more information, contact your Morgans adviser of for your nearest Morgans office.

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so. Those acting upon such information without advice do so entirely at their own risk.

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