Federal Budget 2021-22 announced: What's in it for savers?

author-avatar By on May 11, 2021
Federal Budget 2021-22 announced: What's in it for savers?

Treasuer Josh Frydenberg has handed down a big spending budget as promised tonight. Here's what's in it.

The second budget in just six months following last year's delayed COVID budget, the Treasurer has unveiled the government's latest spending plan which takes the deficit to $161 billion this year, before falling to $57 billion in 2024‑25.

Intended to turbocharge Australia's economic recovery from COVID-19, some of the biggest items set to affect everyday Aussie savers in 2021-22 include:

"The Morrison Government’s plan to secure Australia’s recovery will rebuild our economy and create more jobs to ensure we come back stronger from the COVID‑19 induced recession," Treasurer Frydenberg said. 

"The Australian economy has rebounded at its fastest pace on record over the latter half of last year, outperforming all major advanced economies in 2020.

"The 2021‑22 Budget will consolidate these gains and put us on course for the unemployment rate to fall below 5%, reaching 4¾% by the June quarter 2023."

Related: Is Australia's economic recovery actually the best? 

Other major items of interest in this year's budget are as follows:

  • Doubling the commitment to the JobTrainer Fund to $2.7 billion, aimed at creating more than 170,000 new apprenticeships and traineeships
  • Providing $17.7 billion to fund aged care reforms over four years and $13.2 billion for the National Disability Insurance Scheme (NDIS)
  • A new $2.3 billion commitment to mental health care and suicide prevention
  • An additional $15.2 billion over ten years for infrastructure development
  • Investing $1.2 billion in the digital economy through the Digital Economy Strategy
  • Another $1.2 billion for industries hard hit by the pandemic, such as aviation and tourism support
  • $1.9 billion allocated for the vaccine rollout

See below for more information on some of these key items.

Tax relief extended

As predicted by many, the 2020-21 low- and middle-income tax offset (LMITO) has been extended for another year, meaning many Australians will receive tax relief of up to $1,080 (for individuals) or $2,160 (for couples):

Wage Offset
$37,000 or less $225
Between $37,001 and $48,000 $255 plus 7.5 cents for every dollar above $37,000 up to a max of $1,080
Between $48,001 and $90,000 $1,080
Between $90,001 and $126,000 $1,080 minus three cents for every dollar of the amount above $90,000

These tax cuts will cost the budget a further $7.8 billion.

"Treasury estimates that extending the LMITO will boost GDP by around $4.5 billion in 2022-23 and will create an additional 20,000 jobs by the end of 2022‑23," budget papers say. 

"Lower taxes means that hard-working Australians will keep more of what they earn, allowing them to spend more, help grow the economy and create more jobs."

These tax cuts, which were only temporary at first, actually prevented a tax rise for about 10 million Australians. 

"The extension of the Low and Middle Income Tax Offset is welcome. This measure ensures that 10.2 million low and middle income Australians will not see a tax hike of up to $1,080 next year," Director of Tax Communications at H&R Block Mark Chapman said. 

"However, let’s call this what it is and ignore the government spin; this isn’t a tax cut, it's simply the deferral of a tax rise.

"Nobody should be counting the extra dollars in next year’s pay packets because there aren’t any; the tax burden for low and middle income individuals next year is exactly the same as it was this year."

More affordable housing for some

A major part of this budget includes the following housing packages, worth a total of $2 billion in government investment:

  • Extending the six month construction commencement period for HomeBuilder to 18 months for all existing applicants into 2022
  • 10,000 Family Home Guarantee spots made available over four years, allowing some single parents with dependents to secure a home loan (without paying LMI) on a new or existing property with a deposit of as little as 2%
  • Expanding the FHLDS (now the New Home Guarantee) with an additional 10,000 places in 2021/22 for first home buyers building a home or buying a newly-built home 
  • Increasing the amount of voluntary super contributions that can be released under the First Home Super Saver Scheme from $30,000 to $50,000

The Federal Government is also adding an extra $124.7 million in funding for states and territories to bolster public housing stocks.

"The Government recognises the importance of home ownership and the economic and social benefits it provides," Treasury said. 

"That is why the Government is establishing the Family Home Guarantee, creating a pathway to home ownership for single parents to enter or re-enter the housing market."

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

A major investment in childcare subsidies 

Already announced before tonight's budget, the government is putting $1.7 billion towards childcare subsidies, aimed at increasing the affordability of childcare for low‑ and middle‑income families.

This package will subsidise up to 95% of childcare costs for families with two or more children from 2022, and will also remove the $10,560 per child cap for subsidies.

The Treasurer said this will leave 250,000 families better off by an average of $2,200 each year.

"Childcare is an important driver of higher workforce participation and women’s economic security," he said. 

"(This will give) more parents, especially women, the choice to take on extra work."

The Grattan Institute’s Danielle Wood said this package tackles “some of the worst out-of-pocket costs and workforce disincentives”, but said it remains too limited in scope. 

“Almost 1 million families now use child care, and many would like to work more if they could afford to do so. A broader policy supporting more families would have much larger and more widespread economic benefits,” Ms Wood said.

Superannuation changes (again) 

Seemingly always being chopped and changed, four major changes have taken place regarding superannuation in this year's budget:

  • The Government will remove the current $450 per month minimum income threshold for the superannuation guarantee
  • It will allow those over 60 to contribute up to $300,000 into their super if they downsize their home
  • Older Australians (67 to 74) will no longer need to meet a work test before they can make voluntary contributions to their super
  • It has also enhanced the Pension Loan Scheme, providing immediate access to lump sums of around $12,000 for singles and $18,000 for couples

"We want all Australians to get the most out of the superannuation system," Mr Frydenberg said. 

"On average women retire with less superannuation than men. This (removing the $450 minimum income threshold) will improve economic security in retirement for around 200,000 women."

Related: How to check if COVID-19 has affected your superannuation

Insurance protection for North Australians

A $10 billion government guarantee has been included in the budget to make insurance more affordable in Northern Australia.

The high frequency and severity of cyclones and other natural disasters in North Queensland are already making insurance premiums 'unaffordable' there, costing several times the Australian average in some cases for home, landlord, storm and car insurance. 

The Government intends to establish a reinsurance pool for cyclones and related flooding, to commence from 1 July 2022, to combat this. 

According to the Treasurer and the Prime Minister Scott Morrison, this will reduce insurance premiums across Northern Australia by over $1.5 billion for households, strata and small businesses over 10 years.

“I’ve listened to our local MPs and senators, I’ve sat down with residents and discussed the issue. Homeowners and businesses have been faced with crippling insurance costs, and in some cases, can’t get insurance at all," Mr Morrison said. 

"It’s not ok, and we’re going to change that. Our plan will give more Australians in cyclone-prone areas access to affordable insurance.”

More than 500,000 residential, strata and small business property insurance policies in Northern Australia are expected to be covered by the reinsurance pool.

See also: How climate change could make insurance even more expensive

Image via Josh Frydenberg, Twitter (@JoshFrydenberg)


The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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