3 Things you didn't know about the Federal Budget
Federal budget announcements are just that... Announcements.
We're currently in that weird twilight zone of NOT yet law but if enacted (when receiving royal assent) will apply as per the details found in the announcements.
You'll be hearing a lot about the broad federal budget announcements in the media.
Let's take a look at some of the key highlights + some of my own musings regarding the SMSF/Superannuation context.
MOST importantly, the government have seemingly honoured their commitment to NOT make any large changes to superannuation. Instead, they've only tinkered so to make some improvements which is a plus;
Removal of the 'work test' for non concessional contributions: individuals over the retirement age (but less than 75) will no longer need to have worked a minimum number of hours in order to contribute their 'after tax' money into superannuation. This will most likely apply as from the 2023 financial year and onwards.
Reducing the age of 'downsizer contributions': a key eligibility requirement was being 65 years old at the time the contribution was made to super as a result of selling your main residence. This is being changed to age 60.
Removing the $450 per month income threshold: currently an individual needs to earn $450 per month before superannuation guarantee payments are required to be paid by the employer to their super fund. This is being removed so that every dollar of employment income will require a payment of super into the nominated super fund. This will most likely apply from the 2023 financial year and onwards.
All in all, in my humble opinion, the above is positive for the superannuation context. Let us all bask in the apparent sunshine - for now! Whilst I'm glad there hasn't been a 'tax grab' in THIS budget, the debt must eventually be paid. It's forecast that the net debt will be at 40.9% of the GDP by 2024-2025. In other words, they're estimating $980 billion dollars in net debt at that time. The debt can be paid by growing the economy, increasing taxes and/or reducing spending. I don't want to be the 'negative Nelly', but I can't help think at some point the Government will need to increase taxes and then take a look at superannuation as one possible source of funding. Still, I think it would be incredibly brave of the Government of the day to consider increasing the current concessional tax rate of 15% OR change the current 0% tax rate for superannuation funds paying pensions to retired members. Instead (I hope), they will continue to tinker rather than use a sledgehammer approach. For as long as I've been involved in the superannuation industry, a constant theme has been CHANGE to the rules and regulations and it's one of my roles to keep abreast of these for you 👍.
If you would like to have a chat about these announcements, feel free to reach out to me with an email or phone call.