2021 Budget Impacts to your Financial Plan


As Winston Churchill once said, “Never let a good crisis go to waste”. He was working on forming the United Nations after World War II.

The global COVID-19 pandemic, lockdowns and subsequent changes to working arrangements provided the perfect opportunity for structural reform. Get rid of the inefficient taxes such as stamp duty and payroll taxes that stifle growth and stop people from moving for work or employing more people. Real reform of our archaic tax system with root and branch reform. The Covid crisis would have provided both the political capital and public understanding needed for a modern system to allow the economy to grow, encourage business and to provide income for the government.

Well, we didn’t quite get that, but we did get a change of rhetoric! They have changed from ten years of ‘debt and deficit disaster’ and needing to balance the budget, to throwing all that out the window. Debt no longer matters as it’s all about jobs and unemployment. $161b deficit? Nah – not a problem.

Talk about a triple back flip with a half pike!

This year’s budget is OK – it’s just a lost opportunity. Then again, I wouldn’t be surprised if there was an election called early as there was also $10b of ‘unallocated announcements’.

Sounds like an election war chest to me!

The irony is that we do need to run deficits when the economy needs support. Which is also exactly what happened in the GFC, but that is another story.

So, what are the changes announced in the budget relating to clients from a Financial Planning perspective? No huge changes, but there are a few good tweaks.

  1. Concessional Contribution limit – the existing $25k is increasing to $27.5k per person allowing for a bigger tax deduction and getting more funds into Superannuation. (good!)
  2. Non Concessional contribution limit – increasing from $100k to $110k per year. (also good!)
  3. Transfer balance cap – Increasing the amount of super that can be moved into a tax-free pension will rise from $1.6m to $1.7m. (good but it doesn’t help everyone)
  4. Downsizer contribution – This allows you to contribute up to $300k each into super if you sell your home that you have owned for 10 years. Currently, you need to be over 65. This will be reduced to age 60 to align with the other rules around pensions. (good if you can use it)
  5. First Home Super Saving Scheme – First home buyers (maybe your kids?) are able to salary sacrifice up to $15k pa and then withdraw it to buy their first home. The maximum amount was $30k and this has now increased to $50k.
  6. Removing the work test – Currently, you need to meet a ‘work test’ if you are over 67 to contribute to super. This is being increased to 74 which will introduce planning opportunities for some clients.

Of course, some of these still need to be legislated and would only come into force July 2022. We will be working through all the opportunities and will discuss them with you at your next review. If you have any questions before then, feel free to email us.

Now, where did I put my ‘Back in Black’ budget mug from 2019?

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