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On 6 October 2020, Josh Frydenberg announced his second Federal Budget as Treasurer. It was a world away from his first, just over 18 months ago, where he had claimed that Australia was “back in the black”.
Unfortunately Josh’s vision of 2020 was not 20/20 and this budget is billed as an ‘Economic Recovery Plan for Australia’, focused on creating jobs and rebuilding the economy.
The main headline measures are bringing forward tax cuts already announced in the 2018 and 2019 Federal Budgets, but there are also some interesting announcements around superannuation.
The main announcements affecting tax, superannuation and older Australians are outlined below.
Stage 2 of the Personal Income Tax Plan will be brought forward to this financial year, providing 11 million Australians with an immediate tax cut. There is also a further additional benefit whereby the LMITO (low and middle income tax offset) will be provided for another year and the LITO (low income tax offset) was increased from $445 to $700.
The government estimate that more than 7 million Australians should receive tax relief of $2,000 or more for this financial year (compared with 2017/18). Treasury has provided the following table that provides examples of tax relief for different income levels, comparing 2017/18 (before the Personal Income Tax Plan took effect) with the 2020/21 financial year.
|Taxable income||2017/18 tax liability||2020/21 tax liability||$ change in tax||% change in tax|
Source: Treasury. Note these are only based on basic tax scales, LITO, LMITO and the Medicare levy. Actual outcomes for individuals may differ.
There will be a sigh of relief that there are no changes to superannuation rules this year.
The Your Future, Your Super package is aimed to improve the superannuation system through four new measures. Treasury estimates that these reforms will save members $17.9 billion over the next ten years.
Having your superannuation follow you
Your super account will be ‘stapled’ to you so that a new one is not started each time you start a new job. The aim is preventing the creation of unintended multiple superannuation accounts when employees change jobs.
Making it easier to choose a better fund
Australians will have access to a new interactive online YourSuper comparison tool that will rank MySuper funds by fees and returns.
Holding funds to account for underperformance
The government will require super funds to meet an annual objective performance test. Those that fail will be required to inform members, and persistently underperforming products will be prevented from taking on new members.
Increasing transparency and accountability
Super trustees will be required to comply with a new duty to act in the best financial interests of members and demonstrate that there was a reasonable basis to support their actions being consistent with members’ best financial interests. The Government will also require superannuation funds to provide better information regarding how they manage and spend members’ money in advance of Annual Members’ Meetings.
Measures for older Australians
One-off payments for Age Pension
Two $250 payments will be paid – one in December 2020 and another in early 2021. The payments are available to people who receive the Age Pension, disability support pension, carer payment, family tax benefit, family tax benefit lump sum, double orphan pension, carer allowance, Commonwealth Seniors Health Card, pensioner concession card and veteran card.
Additional funds for aged care
This government pledged an additional $1.6 billion for an additional 23,000 home care packages across all package levels. This is on top of the additional $1.6 billion already announced in 2020. This will increase the number of home care packages to around 185,500 in 2021 (a three-fold increase from around 60,300 in 2013). This will cut the waiting lists for some, but it won’t help all of the 60,000 people that COTA reports are currently on waiting lists.
There will also be $11.3 million for training and support for aged care providers and carers of people experiencing behavioural and psychological symptoms of dementia.