(Feedsy Exclusive)
Proposed changes to superannuation, home buyer support, social security, and more have come out on the heels of the recent federal election and Federal Budget. Here’s what you need to know
Eligibility for many social security benefits is based on your income and assets. Deeming rules impact some income tests for certain concession cards, such as the Low Income Health Card and the Commonwealth Seniors Health Card. The deeming rate is an assumed rate of return on certain investments regardless of actual income, interest, dividends, and capital gains.
The current rates came into effect on 1 May 2020, and the federal commitment is to freeze deeming rates until the year 2024. While the proposed changes won’t decrease income, you may be allowed greater financial investment levels. Your entitlement calculations will automatically be adjusted by the Department of Veterans Affairs or Centrelink.
If you are of your Age Pension age but do not qualify based on income or assets, you may be eligible for the Commonwealth Seniors Health Card (CSHC) because it has its own income test. Your income for the purposes of CSHC eligibility is based on certain retirement income streams and adjusted taxable income.
The income eligibility thresholds are expected to change from $57,761 to $90,000 for single households, $92,416 to $144,000 for couples, and $115,422 to $180,000 for illness-separated couples. If you currently hold a CSHC, you don’t need to do anything. If you become eligible, you need to apply with Centrelink and provide income and identification documents.
Downsizer contributions let people contribute some or all of house sale proceeds — up to $300,000 for an individual or $600,000 for a couple — to superannuation and do not affect other caps. They do not have a “total super balance limit” or upper age limit, unlike personal after-tax and other contributions. The current eligibility age is 65 and will be going to age 60 on 1 July 2022 — the proposal is to reduce it to age 55 on 1 July 2022 instead.
Downsizer contributions can help you raise or maintain pension or other benefit entitlement for you or your partner. They do not count towards your concessional and non-concessional caps.
The following proposed changes relate to buying and purchasing homes.
If you receive social security and sell your primary residence, there is currently a 12-month exemption that applies to a portion of sale proceeds intended towards purchasing, constructing, or renovating your new primary residence. The government is proposing to extend this exemption for another period — the earlier of 12 months or purchase, construction, or renovation of the new primary residence.
The extended exemption would be available under circumstances involving delay over which you had no control and is a discretionary exemption granted by Centrelink or the Department of Veterans Affairs. There remains no income test exemption.
The government is proposing a Regional First Home Buyer Scheme to provide support in the form of a government guarantee of up to 15% of the purchase price for 10,000 first home buyers. This would essentially allow eligible first home buyers to avoid having to pay mortgage insurance. To qualify, you must be an Australian citizen and first home buyer over the age of 18, reside outside a capital city for at least the previous 12 months, live in the purchased property, and have a taxable income up to $125,000 for a single or $200,000 for a couple.
Other support schemes — such as the First Home Super Saver Scheme and state-based programs and grants — will continue to operate in addition to the Regional First Home Buyer Support. Price thresholds will depend on where the property is located.
The proposed commencement date for the Help to Buy scheme has not yet been announced. Help to Buy is a shared equity scheme that provides support — for up to 40% of a new home’s purchase price and up to 30% for a current home — to up to 10,000 people every year. This will avoid the necessity for Lenders Mortgage Insurance, but you will have to have at least a 2% deposit.
After you make the initial purchase, it would then be possible to buy additional property interests (at least 5%) from the government without needing to pay the government rent for its share. Note that where you make more than the annual income caps for two consecutive years, you will have to partly or fully repay the government contribution based on affordability — though the method of determining how this requirement would work has not been announced.
These proposals are not yet law until they are legislated into effect, so commencement dates and details may change. You should not act on these proposed changes without first consulting your financial advisers, who can provide further up-to-date information and help you understand how and if you may be able to take advantage of them.
If this article has inspired you to think about your own unique situation and, importantly, what you and your family are going through right now, please contact your advice professional.
| Posted in:News |
 "RBA warns of damage from rising inflation")
Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
The Reserve Bank board is committed to doing what is necessary to ensure inflation returns to the two to three per cent target and households should be prepared for further interest rate rises, governor Philip Lowe has warned.
He said while rising inflation had been driven by global events, increasingly domestic factors in Australia were coming into play.
“Following the strong recovery from the pandemic, growth in domestic spending is now testing the ability of the economy to meet the demand for goods and services,” Dr Lowe told a forum in Sydney on Tuesday.
“This is particularly evident in the labour market, with many firms reporting that the availability of labour is a significant constraint on their ability to operate and/or expand.”
Petrol prices have also risen further due to global developments and the outlooks for retail electricity and gas prices have been revised higher due to pressures on capacity in that sector.
The RBA raised its inflation forecast to a peak of around seven per cent in the December quarter, having earlier predicted a top of six per cent.
“High inflation damages the economy, reduces the purchasing power of people’s incomes and devalues people’s savings,” Dr Lowe told the American Chamber of Commerce in Australia event.
“It is also regressive, hurting most those who are least well equipped to protect themselves.”
As such, it is important the RBA charts a way back to the two to three per cent inflation target, although Dr Lowe concedes this can’t be done immediately.
“Australians should be prepared for more interest rate increases,” Dr Lowe said.
“The level of interest rates is still very low for an economy with low unemployment and that is experiencing high inflation.”
The RBA board has raised the cash rate at its past two monthly meetings by a total of 75 basis points, the latter being a 50 basis point increase and the largest rise since February 2000.
“We decided to make a bigger, 50 basis points, adjustment on the basis of the additional information suggesting a further upward revision to an already high inflation forecast,” Dr Lowe said.
“The board also gave consideration to the fact that the level of interest rates was still very low.”
Economists are predicting another 50 basis point rise in July, which would take the cash rate to 1.35 per cent.
“I want to emphasise though that we are not on a pre-set path,” the governor said.
“How fast we increase interest rates, and how far we need to go, will be guided by the incoming data and the board’s assessment of the outlook for inflation and the labour market.”
| Posted in:News |
 "Superannuation changes every business owner needs to know come 1 July")
(Feedsy Exclusive)
Superannuation Changes Every Business Owner Needs to Know
With the end of financial year (EOFY) 2022 just around the corner, it’s crucial for business owners to know about soon-to-be-implemented changes in Australian super funds.
Come 1 July, companies need to be prepared to address superannuation guarantee (SG) modifications to ensure they remain compliant.
Beginning 1 July 2022, the superannuation guarantee will increase to 10.5 per cent. It must be noted that since 1 July 2021, the SG was already set at 10 per cent, and under the current timetable of mandated increases, the percentage rate will rise to 11 per cent on 1 July 2023. The superannuation guarantee will continue to rise at a pace of 0.5 per cent per year until 1 July 2025, when it will have reached its final rate of 12 per cent.
Additionally, the $450 monthly earning threshold will be eliminated, allowing all employees to receive the SG contribution regardless of their earnings. This could mean paying the superannuation guarantee to some employees for the first time. These SG changes also apply to self-managed super funds.
Employees who were previously not eligible for super under the $450 threshold are required to provide their employer with a nominated super fund. This super fund account, once activated, will remain attached to all future changes in their employment.
Staff below the age of 18 who work less than 30 hours per week are not eligible for superannuation.
In line with these developments, businesses would need to update their payroll software to compute the superannuation guarantee entitlement accurately.
The penalty for late or wrong super payments can be quite severe, so companies should act now to ensure that their systems are up to date before 1 July.
The end of financial year in Australia also signals the need for businesses to stay on top of and finish bookkeeping tasks, file tax returns, and make plans for the coming year.
A checklist prepared by business.gov.au is available to assist firms in preparing and organising for EOFY. These include:
The clock’s ticking.
Get all crucial tasks done now to avoid unnecessary stress and penalties come 1 July.
If this article has inspired you to think about your own unique situation and, importantly, what you and your family are going through right now, please contact your advice professional.
| Posted in:News |
 "Decisive rate rise was needed: RBA’s Lowe")
Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
Reserve Bank governor Philip Lowe has warned Australians to be prepared for higher interest rates, saying inflation must be brought under control.
In his first public appearance since the RBA raised the cash rate by a larger than expected 50 basis points at last week’s board meeting, Dr Lowe said he is predicting inflation to rise to seven per cent by year end.
That compares with a current rate of inflation of 5.1 per cent.
“That’s a very high number and we need to be able to chart a course back to two to three per cent. I’m confident we can do that but it’s going to take time,” Dr Lowe said in a rare television interview on ABC’s 7.30 on Tuesday.
“With inflation being as high as it is, and with interest rates as low as they are, we thought it was important to take a decisive step to normalise monetary conditions and we did that at the last meeting.”
He said it is reasonable to expect the cash rate will get to 2.5 per cent at some point, but said it will be driven by events.
The cash rate currently stands at 0.85 per cent after the RBA raised it at consecutive board meetings from a record low 0.1 per cent.
It was only last year the RBA had been expecting to keep the cash rate low until 2024, but Dr Lowe said that was never a promise.
“The economy didn’t evolve as we expected. It’s been much more resilient and inflation has been higher. We thought we needed to respond to that,” he said.
He said the economy is in remarkable shape with the unemployment rate at a 50-year low, households having built up financial buffers of around $250 billion and the number of people falling behind on their mortgage repayments actually declining..
His comments came as global share markets are in turmoil fearing the US economy could fall into recession if the Federal Reserve raises interest rates aggressively to combat its own inflation problem.
US inflation is at 8.6 per cent, it highest level in 40 years.
But Dr Lowe is confident the Australian economy will continue to grow pretty strongly over the next six to 12 months.
“There is still a bounce back from all the COVID-19 restrictions, people are spending in a way they weren’t able to do last year,” he said.
Dr Lowe said there is a big backlog of construction work to be undertaken and the number of job vacancies is extraordinarily high.
“So people can be confident the jobs will be there and in that environment people will keep spending,” he said.
| Posted in:News |
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