Federal Budget 2021-22: Superannuation & Related Measures

The key superannuation and related measures announced in the Budget include:

• Superannuation contributions work test – to be repealed from 1 July 2022 for voluntary non-concessional and salary sacrificed contributions for those under age 75. However, the work test will still apply for personal deductible contributions by those aged 67-74.
• SMSF residency rules – to be relaxed by extending the central management and control test safe harbour from two to five years, and removing the active member test for both SMSFs and small APRA funds.
• Conversions of legacy income streams – individuals will be permitted to exit certain legacy retirement income stream products (excluding flexi-pensions or lifetime products in APRA-funds or public sector schemes), together with any associated reserves, for a two-year period. Any commuted reserves will not be counted towards an individual’s concessional contribution cap. Instead, they will be taxed as an assessable contribution for the fund.
• Super Guarantee $450 per month threshold – to be removed from 1 July 2022.
• Downsizer contributions – eligibility age to be lowered from 65 to 60.
• First Home Super Scheme – to be extended for withdrawals up to $50,000, plus some technical changes for tax and administration errors in applications.
• Victims of domestic violence – the Government will not proceed with its previous proposal to extend the early release of super to victims of family and domestic violence.
• Pension Loans Scheme – will be expanded to allow access up to two lump sums in any 12-month period (up to a total of 50% of the maximum annual Age Pension); together with a Government guarantee that “no negative equity” will apply.

At the same time, the Budget did not contain any change to the legislated Super Guarantee rate increase from 9.5% to 10% for 2021-22.

As previously announced, the Budget confirmed:

• 30% Digital Games Tax Offset – for eligible businesses that spend a minimum of $500,000 on qualifying Australian games expenditure (excluding gambling) from 1 July 2022.
• Intangible assets depreciation – option to self-assess effective life for certain intangible assets (eg intellectual property and in-house software).
• Brewers and distillers – the excise refund cap for small brewers and distillers will increase to $350,000 from 1 July 2021.
• Venture capital – a review of the venture capital tax concessions will be undertaken in 2021.
• Child care – increased subsidies from 1 July 2022.

Housing

• Government to help another 10,000 first-home buyers build a new home with a 5% deposit.
• Some 10,000 single parents to purchase a home with a 2% deposit.
• Increasing the amount that can be released under the First Home Super Saver Scheme to $50,000 from $30,000.
• To allow those aged over 60 to contribute up to $300,000 to their superannuation fund if they downsize their home, freeing up more housing stock for younger families.

Business

• Budget provides a further $2.1 billion in targeted support for aviation, tourism, arts and international education providers.
• Tax relief for around 1,000 small brewers and distillers.
• Double its commitment to the “JobTrainer” fund to help create new apprenticeships and traineeships.
• Investing $1.2 billion to build digital infrastructure, skills and cyber security.
• Launching a new “patent box”, under which income earned from new patents developed in Australia will be taxed at a concessional 17% rate. The patent box will apply to the medical and biotech sectors.

Welfare

• To spend $13.2 billion over four years for National Disability Insurance Scheme.
• To commit $17.7 billion in new aged care funding.
• A $2.3 billion commitment to mental health care and suicide prevention.
• To commit $2 billion to fund preschools.
• To provide more than $19 billion in funding for universities in 2021-22.

The Government believes the 2021-22 Budget will consolidate the gains made since the last Budget in October 2020 and put the economy on course for the unemployment rate to fall below 5%. To reach these targets the Government has committed $291 billion (or 14.7% of GDP) in direct economic support for individuals, households and businesses since the onset of COVID-19. Some of the measures mentioned above are fleshed out below.

You might also want to read this Federal Budget 2021-22: SUPERANNUATION.