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We have summarised the key points from the 2021-2022 budget, that we believe will have the most impact on our clients.
Please keep in mind that all budget measures are proposals and will require the passage of legislation to become effective.
Currently, the Pension Loans Scheme allows older Australians to obtain a voluntary non-taxable fortnightly loan from Centrelink. The loan and all costs and accrued interest must be repaid to the Commonwealth, including from your Estate. Under current rules, the amount you can access as a loan is up to 1.5 times the maximum payment rate of your eligible pension each fortnight.
In the Budget, the Government has announced that they will be increasing the flexibility of the Pension Loans Scheme (PLS) by allowing participants to access up to two lump-sum advances in any 12 month period up to a total value of 50% of the maximum annual rate of the aged pension. Based on current Age Pension rates, the total PLS is around $12,385 per year for singles, while couples combined could receive around $18,670. The Government will also introduce a No Negative Equity Guarantee meaning that the Government will not claim back more than the sale price of the house used to guarantee the payment when it is sold.
Note, the total amount eligible people can receive under the pension loans scheme, including any lump sum advance payments, has not changed. The total amount cannot exceed 150% of the maximum Age Pension which is around $37,155 per year for singles and around $56,011 per year for couples.
To raise awareness of the Pension Loan Scheme, the Government will also spend $21 million on advertising and raising awareness of the scheme.
Anyone who has contact with the Aged Care system either as a resident or a family member of a resident will know that the system is in desperate need of a cash injection. The Government announcement of $17.7 billion to be spent on aged care reform is an excellent start and a direct response to the Royal Commission into the quality and safety of the system. The funding includes spending on:
We await further detail with interest and hope that the proposed changes will not make the existing application process more complicated.
As already legislated, the government has made several changes to working-age payments from 1 April 2021:
If you have any questions or concerns about the proposals from the Federal budget announcements, please contact your Ulton Wealth Management Advisor to discuss.
Want to learn more about the other announcements from the 2021 budget? We have broken the full budget down into 6 main categories for usability.
Sources:
The Commonwealth of Australia, Budget 2021-22, https://budget.gov.au/
Australia Taxation Office, First home super saver scheme, https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/
SMSF Association 2021-2022 Federal Budget Summary https://www.smsfassociation.com/resource-library/2021-2022-federal-budget-update
Australian Government Services, How much can you get, https://www.servicesaustralia.gov.au/individuals/services/centrelink/pension-loans-scheme/how-much-you-can-get
FirstTech Federal Budget Briefing 11 May 2021, https://www3.colonialfirststate.com.au/adviser/platforms/news-and-updates/cfs-news/federal-budget-may-2021.html
Wealth Management Disclaimer
Our liability is limited by a scheme approved under Professional Standards Legislation, except where we provide financial services as an authorised representative of Ulton Wealth Services Pty Ltd (holder of Australian Financial Services License No. 497721).
This communication has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individuals needs and you should seek advice from your financial adviser before making any investment decisions. Sub Authorised Representative No.245052 of Ulton Wealth Management Pty Ltd. All Ulton Wealth Managers can provide financial services as Sub-Authorised Representatives of Ulton Wealth Management Pty Ltd. ABN 73 168 815 450 | Corporate Authorised Representative 460875 of Ulton Wealth Services Pty Ltd | ABN 86 614 308 628 | AFSL 497721.
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