Federal Budget 2021

12 May 2021

The focus of this year’s Federal Budget is to maintain and grow Australia’s post-pandemic economic recovery, which has been better than expected.

While several super and retirement measures were announced, most are changes or adjustments to existing measures.

Note: Many of the below changes are subject to legislation and due to start from 1 July 2022.

Super

Retirement

Business

What it means for super

$450 monthly income threshold removed

The Government will remove the $450 minimum monthly income threshold, meaning more low paid and casual workers (including particularly many women) will receive Super Guarantee (SG) contributions. This will benefit around 300,000 workers from 1 July 2022.

Removal of the 'work test'

The Government will remove the work test from 1 July 2022. This test requires those aged between 67 and 74 to be gainfully employed for at least 40 hours over 30 consecutive days during the financial year before they can make voluntary contributions to their super.

This will allow people aged 67 to 74 years to make voluntary contributions to their super no matter what their working arrangements are (subject to existing contribution cap rules). However, people aged 67 to 74 years will still have to meet the work test where they want to claim a tax deduction for after tax contributions made during the year (known as personal deductible contributions).

First Home Super Saver Scheme

The Government will increase to $50,000 the maximum amount of voluntary contributions aspiring home buyers can take from the First Home Super Saver Scheme. 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, salary sacrifice contributions up to a maximum of $50,000 will be allowed into a super fund. For couples, both individuals will be able to use their caps for a maximum of $100,000.

Note, Super Guarantee (SG) contributions cannot be withdrawn under the scheme.

Transfer of unclaimed super to KiwiSaver accounts

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

New caps apply from 1 July 2021 

While not part of the 2021-22 Federal Budget, it is worth noting that thresholds applying to some existing super measures increase from 1 July 2021. This includes increases to the amount you can voluntarily contribute to super.

The key changes from 1 July 2021 are the:

  • concessional contributions cap – that applies to Super Guarantee (SG) and salary sacrifice contributions – increases to $27,500 (up from $25,000)
  • the non-concessional contributions cap – that applies to after tax contributions – increases to $110,000 (up from $100,000)
  • the total super balance (TSB) increases to $1.7 million (up from $1.6 million). The TSB is the total amount you can have in the super system, and is used to determine your eligibility for several super-related measures in the following financial year (such as contribution caps and government co-contributions)
  • the general transfer balance cap – a lifetime limit on the total amount of super that can be transferred into retirement products – increases to $1.7 million (up from $1.6 million).

What it means for retirees

New age threshold for downsizers

The Budget proposes that from 1 July 2022 people who downsize their family home will be able to contribute $300,000 to super ($600,000 for couples) at age 60. Currently, retirees have to be 65 or over to do this.

Note, other eligibility requirements apply.

What it means for your business

$450 monthly income threshold for SG in 2022

The Government will remove the $450 minimum monthly income threshold for employees. This means from 1 July 2022 most employees will need to be paid the Super Guarantee (SG) contributions regardless of their hours.

Super Guarantee increase to proceed in 2021

The Budget did not delay scheduled increases to the Super Guarantee (SG). From 1 July 2021 SG contributions increase from 9.5% to 10%, eventually reaching 12% on 1 July 2025.

Extending tax support for business

The two tax incentives announced in the 2020-21 Budget have been extended by one year — temporary full expensing and temporary loss carry-back.