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The Budget in Review

 

Given the significant economic effects of the COVID-19 pandemic, the 2020-21 Budget has a strong focus on reinvigorating the Australian economy through an emphasis on job creation with a variety of programs and the encouragement of consumer spending through tax cuts and extra support payments. Naturally, these policies lead to a significant deficit.

 

Notwithstanding this economic stimulus, the Budget also announced significant reforms to the Australian superannuation system. From 1 July 2021, employers will pay superannuation contributions to a new employee’s existing super fund, unless the individual chooses otherwise. The primary objective of this policy is to reduce the number of unintended multiple accounts. The government also announced the introduction of an annual performance test for superannuation products, starting with MySuper from 1 July 2021.

 

The following sections outline details of announcements in a range of areas together with Mercer’s perspective on the major policies. 

 

Federal Budget

At a glance

 

  • Superannuation and retirement changes

     

    The government has announced a number of significant reforms within its Your Future, Your Super package intended to operate from 1 July 2021 including:

    • Super to follow the employee:
      • For employees as at 1 July 2021, their existing superannuation fund account for receipt of superannuation guarantee (SG) contributions will be ‘stapled’ to them and apply until they elect otherwise to avoid the creation of a new account when that person changes their employment.
      • An employer’s nominated default fund will only apply if an employee does not have an existing superannuation fund account – i.e. the employee is new to the workforce and does not choose a fund.

     

    • Empowering members to compare and select funds:
      • The Australian Taxation Office (ATO) will develop systems so that individuals will be able to select a super product from a table of MySuper products through a new ‘YourSuper’ portal  - the portal will include a comparison tool with quarterly updated and ranked MySuper products.

     

    • Holding funds to account for underperformance: 
      • New members will not be permitted to join funds or super products determined to be “underperforming” according to the Australian Prudential Regulation Authority (APRA) benchmarking tests in two successive years – the annual performance test will apply to MySuper products from 1 July 2021 and to Trustee directed products (i.e. multi asset class options) from 1 July 2022.

     

    • Improving the transparency and accountability of superannuation funds:
      • New laws will seek to strengthen the best interests obligations on superannuation trustees to require that their actions are always consistent with members’ retirement savings being maximised; requiring trustees to demonstrate a reasonable basis to support all fund expenditure and to provide prescribed information to members in advance of annual member meetings.

     

  • Aged care initiatives

     

    • $1.6 billion allocation for an additional 23,000 Home Care Packages 

     

    • A further $91.6 million to fund the second stage of implementation of the new Australian National Aged Care Classification system 

     

    • $35.6 million of further funding to provide grants to eligible residential aged care operators which are experiencing financial difficulty 

     

    • $29.8 million for a new scheme to better manage the response to reported serious incidents

     

    • $10.6 million to help connect young people with disabilities currently living in aged care homes with age appropriate accommodation

     

  • Investment implications

     

    • The rapid and coordinated fiscal and monetary policy responses by the Australian government and the Reserve Bank of Australia (RBA) over the past six months have helped mitigate the most severe economic downturn the country has witnessed since the 1930s. 

     

    • The Budget’s combination of personal income tax cuts, handouts and business incentives such as depreciation and tax loss offsets, as well as infrastructure spending, represent a balanced dose of fiscal stimulus. 

     

  • Workforce initiatives

     

    • The 2020 Budget casts a wide net that both builds on previous initiatives and introduces new programs that aim to protect jobs by stabilising today’s workforce and reinforcing the viability of the workforce of the future. 

     

  • Health initiatives

     

    • A $5.7 billion budget for mental health in 2020-21 includes a doubling of Medicare funded psychological services from 10 to 20 consultations.  

     

    • To address the decreasing number of young Australians with private health insurance, insurers will be allowed to increase the age of dependants – from 24 to 31 – to encourage continuity of cover and also allow people with a disability to remain on their family policy.

     

    • $17.1 million to enhance transparency of out-of-pocket costs for Australians with private health insurance via the Medical Cost Finder website. 

     

    • Extension of funding of telehealth services for an additional six months from 30 September 2020.

     

 

 

Time to learn, time to prepare

To learn how Mercer can assist your organisation with the outcomes from the 2020 Federal Budget speak with a specialist Mercer consultant today.

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This content is intended to inform clients of Mercer’s views on particular issues. It is not intended to be provided to any person as a retail client and should not be relied upon or used as a substitute for professional advice specific to a client’s individual circumstances. Whilst Mercer believes the prospective information and forward looking statements made by Mercer in this report are based on reasonable grounds, they are predictive in character and may therefore be affected by inaccurate assumptions or by known or unknown risks and uncertainties. This content has been prepared by Mercer Consulting (Australia) Pty Ltd (MCAPL) ABN 55 153 168 140, Australian Financial Services Licence #411770. Any advice contained in this content is of a general nature only and does not take into account the personal needs and circumstances of any particular individual. Prior to acting on any information contained in this content you need to take into account your own financial circumstances, consider the Product Disclosure Statement for any product you are considering and seek advice from a licensed, or appropriately authorised financial adviser if you are unsure of what action to take. ‘MERCER’ is a registered trademark of Mercer (Australia) Pty Ltd ABN 32 005 315 917.

Copyright 2020 Mercer LLC. All rights reserved.

 

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