A couple of weeks ago, the most recent Budget was handed down. It was a very diverse Budget, with many themes. Aged Care, jobs, growth, the economy – the spending is significant! There were also a number of proposed changes that may impact our clients or prospective clients, and it’s those that I want to summarise here.
From 1st July 2022, it is proposed that:
- The work test will be removed for those people aged 67 to 74. Currently, people in this age bracket need to be working to make non-concessional and/or salary sacrifice contributions to super.
- The popular downsizer contribution (the successful scheme allowing those over 65 to contribute proceeds of the sale of their home to super) will been extended via a reduction of the age from 65 to 60.
- The First Home Saver Scheme (within super) will be extended from $30,000 to $50,000 allowing those saving a deposit to more significantly use the tax-effective environment of super.
- Legacy income stream products (such as Term Allocated Pensions) can be commuted back into super. These types of products have previously been non-commutable and in some instances been a nuisance.
- Relaxed residency requirements for trustees of Self Managed Super Fund who live overseas.
- The legislated increase of the rate of superannuation guarantee will occur, taking it to 10%.
These are all positive proposals in our view. In particular, the removal of the work test provides greater access to utilise super as part of retirement planning. Often Budgets come and go with minimal impact, however we have already had a few discussions with clients that may alter their retirement planning as a result of the above proposed changes.
There are other changes proposed too. Many relate to tax, which relate to many Australians. I have not included those in this article, but am happy to discuss how these changes may impact you. The increase in flexibility of the government’s Pension Loans Scheme is interesting. This quasi-reverse mortgage scheme has been available through Centrelink for many decades, however is greatly underutilised. For those who own their home but worry about the level of their retirement income, this should be explored.
An End Of Financial Year Reminder!
It makes sense to include as part of this article, a reminder to ensure that you have taken all of your necessary financial steps in the lead up to 30th June.
Our article from this time last year expands on these, however by way of summary, in the lead up to the end of the financial year, you should consider your position in relation to the below:
- Maximise super contributions for tax effectiveness and to build your retirement savings.
- If you run a SMSF in pension phase, ensure you’ve taken your minimum pension payments.
- Review your capital gains positions on any transactions this financial year.
- Review your Centrelink records and ensure they are up to date.
There is always a lot to consider in the financial planning world. Let us help you understand all of the Budget changes and if they impact you. Contact us today!