Five ways families can use the Federal Budget to get ahead financially

The Federal Budget’s cash splash offers new ways for Australian families to get ahead. See how it will affect you.

Last week’s big-spending federal budget splashes cash all over Australia, and families now have a chance to make the most of it.

Some households receive little benefit, while others will save thousands of dollars, and financial experts say you should understand how it all impacts you.

LifeSherpa CEO Vince Scully describes it as “the Hot Chocolate budget – everyone’s a winner, baby”.

Here’s how families can make the most of the changes.

TAX BONUS

The extension of the Low and Middle Income Tax Offset until the end of 2021-22 delivers a bonus of up to $1080 for people earning less than $90,000.

“More than $2000 for a couple is a material amount of money and it’s an incentive to get your tax return in on time,” Scully says. The offset is paid via a tax refund.

Gemma Wall has a simple but effective budgeting strategy for her family of six. Picture: James Gourley

CHILDCARE SUBSIDIES

Families with more than one child in childcare will potentially receive more than $100 extra a week after the budget boosted the top subsidy from 85 to 95 per cent of fees, and abolished the $10,560 cap on subsidies for each child.

“For couples with two or three kids, that’s a big deal,” Scully says.

But the benefits won’t start until July 2022, earning criticism from some advocates. But if you’re juggling work and a young family, factor this into your planning.

HOME BUYERS

The budget’s bigger First Home Buyer Super Saver Scheme, allowing $50,000 of voluntary contributions to be released rather than the current $30,000, expands potential tax benefits from $5000 to $8000 per person, Scully says.

LifeSherpa CEO Vince Scully says everyone’s a winner in the budget. Picture: Supplied

The extension of the First Home Loan Deposit Scheme by 10,000 places for new homes, and the new Family Home Guarantee to help 10,000 single parents buy a home with just a 2 per cent deposit, will help more homebuyers. But experts have warned people against overextending themselves because interest rates will eventually rise.

AMP financial adviser Di Charman says: “if you are in that first homebuyer space, really understand how you can leverage some of the incentives.”

SUPER BENEFITS

It’s on for young and old, with new superannuation incentives benefiting people at both ends of their working lives.

A work test stopping some seniors aged 67 to 74 contributing to super has been abolished, and downsizers will be able to contribute up to $300,000 each into super from age 60, rather than 65 under current rules.

Young workers and part-timers will benefit from employers being required to pay them super even if their wages are less than $450 a month. Examine if you can make these changes work for you.

EDUCATING YOURSELF

Soon you’ll get more cash back for investing in your own education, with the government removing the exclusion of the first $250 of tax deductions for spending on prescribed courses.

“Your knowledge is power, and the more you invest in your skills they more you are in demand,” Charman says.

“From the first dollar you invest in yourself you are improving your tax position.”

Managing finances for a family of six requires good juggling skills, and Gemma Wall has a simple but effective approach for her household, transferring a set amount into a separate spending account every week.

“We try not to go over it but, of course, we sometimes do,” she says.

AMP financial adviser Di Charman recommends investing in self-education. Picture: Supplied

Breakout …

DON’T FOLLOW GOVERNMENT’S LEAD

While the Federal Government plans to spend more money than it earns every year for a decade, never try this trick with your household budget. Governments have taxpayers as a constant cash source, but individuals don’t. Build your own budget by:

• Going through all bank statements and bills to understand what you earn and spend.

• Creating a budget spreadsheet that maps income and costs – there are plenty of free budget tools online.

• Seeking ways to eliminate your deficit or increase your surplus.

• Setting financial goals and planning to monitor our progress regularly.