The 2021-22 Federal Budget has been released. The Main Points include:
- Super Guarantee Contribution (SGC) rate on Wages is to increase to 10% on 1 July 2021. Subsequently Increase to 10.5% on 1 July 2022 and keep increasing until it reaches 12% on 1 July 2025. An increase of wages costs for Employers is the result. Employees need to review Salary Sacrifice Arrangements as a priority to not breach their concessional cap.
- Removing the $450 Threshold per month before SGC applied to an employee’s wages. Now, Super Guarantee contributions are required on all wages paid from 1 July 2022.
- Removal of the Work Test for Individuals aged 67 to 74 to make Non-Concessional (Personal) contributions to super. For personal contributions, the Non Concessional cap is currently $100,000 but increases to $110,000 from 1 July 2021. Extending the Bring Forward rule to be available up to the age of 74 is a very positive step. Disappointingly, the Work Test will be required to be met to claim a deduction for these contributions. Working 40 Hours in a 30 Day period is required to meet the Work Test.
- Reduce the age limit for Downsizer contributions to super from 65 to 60 from 1 July 2022. Downsizer contributions relate to the sale of the family home where eligibility is met.
The forecasted deficit for this 2020-21 Financial Year is $161 Billion. A $106 Billion deficit is expected for the 2021-22 Financial Year. The forecasted deficit is expected to continue to reduce to a $57 Billion deficit in the 2024-25 Financial Year because of economic recovery.
Net Federal Government debt is expected to increase to $617 Billion this 2021 Financial Year because of Government spending. Net debt is expected to peak at $980 Billion or 40.9% of GDP in the 2025 Financial Year. Gross debt is expected to exceed $1 Trillion due to Government borrowing as a result of covid.
Subsequently, this is a budget aimed at stimulating economic recovery over the next 3 years.
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