2022/2023 Federal Budget Highlights

2022/2023 Federal Budget highlights: What it means for your super

The 2022/2023 Federal Budget was handed down by Treasurer Josh Frydenberg last night and focused on addressing the rising cost of living, shrinking the deficit and lowering the unemployment rate.

This year there was only one announcement related to super – the temporary reduction of pension drawdown minimums to be extended to 30 June 2023, continuing to provide older Australians with more flexibility in their retirement.

It’s important to note that this year is an election year, and this proposed Budget was put forward by the Coalition Government. Should another party win the upcoming election, they may make changes. If this occurs we’ll provide you with any relevant super updates.

Changes from 1 July 2022

In last year’s Federal Budget a number of changes were announced that have since been legislated and are due to come into effect from 1 July 2022.

Increasing the Superannuation Guarantee rate

Australians are being set up to retire with more money as the compulsory Superannuation Guarantee (SG) rate will rise from 10% to 10.5%. Increasing the SG rate has been on the agenda for a long time, with legislation to increase the rate to 12% by 1 July 2025 already passed.

The economic downturn caused by COVID-19 fueled speculation the changes may be delayed, however there doesn’t appear to be any plans to amend the current schedule for increasing the compulsory Superannuation Guarantee rate. Further information can be found on the ATO website.

Although 2020 and 2021 proved challenging, and with 2022 off to a shaky start following the continually evolving Russia-Ukraine crisis, the decision to proceed with the (SG) rate increase is a vote of confidence in our continued economic recovery.

The increase to the SG rate means most Australian employees will enjoy the extra 0.5% increase, which will go directly towards increasing super balances – another step towards helping Australians retire with more money. 

Increased flexibility for older Australians

Changes made to the downsizer contribution and the work test will be coming into effect on 1 July 2022, providing older Australians with more flexibility and control over their retirement savings.

In last year’s Federal Budget the Government announced that they intended to lower the minimum age an individual could make a downsizer contribution from 65 to 60.

The scheme allows eligible people to add up to $300,000, or $600,000 per couple, to their super account, from the proceeds of selling their home. The program will help reduce pressure on housing affordability, by freeing up housing stock for people trying to enter the housing market.

In addition, in last year’s Federal Budget the Government announced its intention to remove the work test for individuals aged 67 to 74 years old. While contributions can be made by anyone in this age range, the work test will still apply to people who claim a tax deduction for their contribution.

Currently people aged 64-74 years old are required to meet a work test to be able to make any contribution to superannuation.

First Home Super Saver Scheme

The First Home Super Saver Scheme (FHSSS) was introduced in the 2017-18 Federal Budget and was designed to help younger Australians use their super account to help save for their first home.

In last year’s Federal Budget the Government announced that they intended to increase the total amount an individual could access via the FHSSS to fund the purchase of their first home from $30,000 to $50,000.

This scheme will help first home buyers access the housing market by allowing them to save within their super, and when ready to purchase, withdraw those funds, along with the interest earned to help pay for the purchase of their first home.

The change to the amount someone can withdraw was recently legislated and is expected to come into effect from 1 July 2022. With this year’s Federal Budget being handed down by Treasurer Josh Frydenberg on the evening of Tuesday 29 March, and there not being any changes announced to this rule, we can be confident that it will come into effect from 1 July 2022.

 

30 March 2022