20 May 2021
2021 Federal Budget: Changes to boost retirement savings
As the COVID economic landscape continues to take shape, Australian Federal Treasurer Josh Frydenberg has handed down the 2021-22 Federal Budget.
Among the proposed changes, he announced continuing tax relief for lower earners, help for older Australians to save for retirement and more assistance for first home buyers.
Read on for a round-up of the changes that will help older Australians save for retirement.
Remember, at the moment these are just proposals and could change as legislation passes through parliament.
Superannuation
Repealing the work test for super contributions
Proposed effective date: 1 July 2022
People aged 67 to 74 will be able to make non-concessional or salary sacrificed superannuation contributions without meeting a work test, subject to existing caps.
This will simplify super rules and increase flexibility for older Australians to save for their retirement.
Currently, people aged 67 to 74 years can only make voluntary contributions to their super if they’ve worked at least 40 hours over 30 consecutive days in the financial year, unless they meet an exemption. The work test will still need to be met for those who wish to claim a tax deduction for personal contributions to super.
Extending access to downsizer contributions
Proposed effective date: 1 July 2022
The Government is proposing to lower the age Australians can make tax-free contributions to their super from the proceeds of selling their homes from 65 to 60.
Other eligibility rules for downsizer contributions will remain unchanged.
Giving retirees opportunity to exit legacy retirement products
Proposed effective date: 1 July after it’s passed as law
The Government will provide a temporary, two-year opportunity for people to transition from certain legacy retirement products to newer, more flexible products if they choose.
Retirees will be able to transfer their capital back into a super account and then start a new retirement product, take a lump sum benefit or retain the funds in that account.
Abolishing the $450 per month income threshold for Superannuation Guarantee (SG)
Proposed effective date: 1 July 2022
The minimum income threshold of $450 per month will be removed, so all eligible employees will receive SG contributions. The SG rate is increasing to 10% from 1 July 2021 and then gradually to 12% by 2025.
Improving the Pension Loan Schemes (PLS)
Proposed effective date: 1 July 2022
The Government is increasing the flexibility and attractiveness of the PLS by:
- introducing a No Negative Equity Guarantee so borrowers will never owe more than the value of their equity in the property the loan is secured against
- providing access to two lump sum advances in any 12 months up to 50% of the maximum annual rate of Age Pension.
The PLS enables senior Australians to receive fortnightly loan payments to supplement their retirement income by using their homes as security, provided the combined Age Pension payment and loan amount does not exceed 150% of the maximum pension payment rate.
Based on current Age Pension rates, a single person could receive lump sum payments of up to $12,385 per year, and couples about $18,670.
If you’d like to discuss any of the points raised, please do not hesitate to contact PSK Financial Services on 9324 8888.
This information is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life).
PSK Financial Services Group Pty Ltd (ABN 24 134 987 205) are Authorised Representatives of Charter Financial Planning Ltd (AFSL 234666), Australian Financial services Licensee and Australian Credit Licensee. Information contained in this article is general in nature. It does not take into account your objectives, needs or financial situation. You need to consider your financial situation before making any decisions based on this information.
