2021 Federal Budget recap

Super and policy news
12 May 2021
5 min read

Josh Frydenberg’s third Budget as Treasurer focusses on initiatives designed to maintain and grow Australia’s post-pandemic economic recovery, which has been better than expected.

Little girl putting money in piggy bank with smiling parents in the background 

At the time of writing, any Budget announcements are proposals only and shouldn’t be considered final until relevant legislation passes. We’ll keep you updated as developments occur.

Breaking down the key announcements

Removing the $450 per month minimum income threshold

The Government will remove the $450 per month minimum income threshold for Super Guarantee contributions. This will allow an estimated 300,000 low paid workers—63% of whom are women—to be eligible to receive mandatory employer super contributions.

Proposed start date: 1 July 2022

New threshold for First home super saver (FHSS) scheme

The Government proposes to increase the maximum amount of voluntary contributions that aspiring home buyers can take from the FHSS scheme, to $50,000.

This scheme allows people to make voluntary contributions to super to save for their first home. These contributions are currently capped at $15,000 a year and $30,000 in total.

Under the proposed changes, contributions into a super fund will be allowed up to a maximum of $50,000 in total. For couples, both individuals will be able to utilise their caps up to a maximum of $100,000 combined.

This scheme relates to voluntary contributions only. First home buyers can’t withdraw any part of their compulsory super savings (super contributions made on their behalf by their employer) under the scheme.

Proposed start date: 1 July 2022

Work test abolished for those aged 67 to 74

The Government will abolish the work test, which currently requires 67 to 74 year olds to be gainfully employed for at least 40 hours (over 30 consecutive days during the financial year) before making concessional or non-concessional contributions.

This will allow these individuals to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice contributions without meeting the work test—subject to existing contributions caps. They’ll still have to meet the work test to make personal deductible contributions.

The existing $1.6 million total super balance cap will continue to apply (which will increase to $1.7 million from 1 July 2021).

Proposed start date: 1 July 2022

Transfer of super to the KiwiSaver Scheme

The Government will provide $11 million over four years from 2021-22—and $1 million per year ongoing—to the ATO to administer the transfer of unclaimed super directly to KiwiSaver accounts (the New Zealand equivalent of Australian super funds).

Proposed start date: 1 July 2021

New age threshold for downsizers

Retirees who downsize their family home will be able to contribute $300,000 to super ($600,000 for couples) at age 60, down from age 65. These contributions won’t count towards the non-concessional contributions cap or the total super balance cap of $1.6 million (which will increase to $1.7 million on 1 July 2021).

Proposed start date: 1 July 2022

Pension Loans Scheme (PLS)

The Government will improve the flexibility of the PLS. It will provide access to advance payments by allowing participants to access up to 26 fortnights’ worth of top-up payments as a lump sum, and introduce a ‘No Negative Equity Guarantee’. This will provide immediate access to lump sums of around $12,000 for singles, and $18,000 for couples.

The No Negative Equity Guarantee will mean that borrowers under the PLS, or their estate, won’t owe more than the market value of their property, in the rare circumstances where their accrued PLS debt exceeds their property value. This brings the PLS in line with private sector reverse mortgages.

Proposed start date: 1 July 2022

New thresholds on 1 July 2021 for some existing measures

While not part of the 2021 Federal Budget announcements, it’s worth noting that the thresholds for several existing super measures will increase from 1 July 2021. This includes increases to the amount you can voluntarily contribute to super, either before or after tax.

Some key super thresholds for 2021–22:

  • The concessional contributions cap will be $27,500, up from $25,000.
  • The non-concessional contributions cap will be $110,000, up from $100,000.
  • The general transfer balance cap will be $1.7 million, up from $1.6 million. (Your personal transfer balance cap will be somewhere between $1.6 and $1.7 million, depending on your circumstances.)

These new thresholds will take effect from 1 July 2021.

Need help?

If you have questions about the Budget announcements and their impact on your personal financial situation, you can make an appointment with a financial adviser from UniSuper Advice. You can also check out the official Budget website.

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