The Federal Budget’s focus was on addressing cost of living pressures and, although it was extremely quiet on superannuation, there was nonetheless healthy adviser interest in some of the proposed measures, including: the tax offset for low to middle income taxpayers, social security measures such as the $250 one-off cost of living payment, and extension of minimum pension drawdowns.
Questions about the Budget handed down this week were among the most frequently asked by advisers in their conversations with BT’s technical services team in the first quarter of the year.
In addition, a technical topic that was amongst those that were top of mind during the 2021 Budget, the work test, has now been clarified, with the passing of legislation in February 2022 – and this has also attracted advisers’ attention.
Mr Tim Howard, Technical Consultant, BT, said, “Some in the wealth management and advice industries may have
expected more proposed measures that would impact clients from this Budget; however, at the same time, the limited changes to areas related to advice will no doubt provide welcome certainty.”
BT’s Technical Services team field over 2,000 queries from advisers every quarter on topics relating to superannuation, tax and social security, with the volume of questions historically peaking in the days after Budget night.
More details on the most popular topics are below.
1. Tax relief for clients with incomes below $126,000
The proposed increase to the low and middle income tax offset (LMITO), effective from 1 July 2021, provides additional tax relief for low and middle income taxpayers in response to the cost of living pressures experienced by Australian households. The proposal will increase the LMITO by $420, with the initial LMITO benefit increasing from $255 to $675 and the maximum LMITO benefit increasing from $1,080 to $1,500. All other features of the current LMITO remain unchanged.
2. Supporting retirees with the extension of minimum pension drawdowns
The Government has announced a proposed extension of the 50% reduction of the superannuation minimum drawdown requirements for account-based pensions and similar products for a further year to 30 June 2023. The reduction will allow retirees to avoid selling assets to satisfy the minimum drawdown requirements. This measure will also apply to clients who are in pension phase within self-managed superannuation funds.
3. No changes to the increase of the Superannuation Guarantee
Conspicuous by its absence on Budget night, the superannuation guarantee (SG) is set to continue to increase as planned. The SG is currently legislated to increase progressively from 10% to 12% by 1 July 2025. The rate of superannuation guarantee will increase on 1 July 2022 by 0.50% to 10.5%. The rate will increase by 0.5% each year until it reaches 12% on 1 July 2025. There was no announcement to change these legislated increases.
4. Social security measures
One of the social security measures that may impact clients is the one-off cost of living payment. From April 2022, eligible income support recipients and concession cardholders will receive a $250 payment; an individual can only receive one payment even if they qualify in multiple ways. The payments will be exempt from taxation and not count as income for social security purposes.
Meanwhile, parents in the paid workforce may benefit from the proposal to enhance paid parental leave. Parental Leave Pay and Dad and Partner Pay will be combined into Paid Parental Leave as a single scheme providing up to 20 weeks in a fully flexible, shareable scheme for eligible working parents. It will also mean that eligible single parents will benefit as they will have access to two additional weeks.
5. Work test amendments become law, bring forward clarified
Related to last year’s Budget, one of the technical topics that has been top of mind for advisers in recent weeks are the changes to the work test, with the passing of legislation in February which confirmed that the work test will no longer be required for voluntary member contributions, including non-concessional, bring-forward non-concessional and small business contributions up to the age of 75 – commencing from 1 July 2022.1 The amendments effectively simplify the rules for older Australians who would like to make additional contributions into their super.
With the passage of the Treasury Laws Amendment (More Flexible Superannuation) Bill 2021, it was also confirmed individuals aged under 75 at any time within a financial year will be eligible to trigger a bring-forward non-concessional contribution, subject to all other existing eligibility criteria being met, such as their recent contributions history, total super balance and timing around when they make the contribution if approaching age 75. The Australian Taxation Office has also recently issued a much-anticipated example, illustrating an individual aged 74 on 1 July, being eligible to trigger a bring-forward non-concessional contribution.2
1. Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021 received royal assent on 22 February 2022, https://www.ato.gov.au/General/New-legislation/In-detail/Super/Flexible-super---Repealing-the-work-test-for-voluntary-superannuation-contributions/
Media Relations, BT
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