Federal Budget 2021-22
On the evening of Tuesday 11th May 2021, the Federal government, lead by Treasurer Josh Frydenberg, unveiled its 2021-22 budget.
Coming off the back of the COVID-19 pandemic, the Treasurer has dubbed it a budget that showed the Australian economy was "soaring back to life" after going into a coronavirus-induced recession last year.
In his Budget speech, the Treasurer stated “Australia is coming back” with unemployment lower than pre pandemic levels (5.6%).
To read our full Federal Budget handout, please click here.
An overview can be found below for Income Tax, Superannuation, Business & Employer changes
*Effective dates for some of the below information will be the start of the first financial year after Royal Assent of the enabling legislation
Key initiatives include:
Extension of temporary full expensing and loss-carry back providing immediate deductions for business investment in capital assets
Introduction of a ‘patent box’ offering tax concessions on income derived from medical and biotech patents
Tax and investment incentives for the digital economy
Extension of the low and middle income tax offset
Child care subsidy increase for families with multiple children
$17.7 billion over 5 years to reform aged care
$2.3 billion on mental health infrastructure and programs
New and extended home ownership programs for first home owners and single parents
Significant changes for superannuation contributions
You & Your Family
The Low and Middle Income Tax Offset (LMITO) will stay around for another year. This was due to expire from 1 July 2021, however will be retained the for 2021-22 year.
The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from 1 July 2020 to take account of recent movements in the CPI so that low-income taxpayers generally continue to be exempt from paying the Medicare levy. For each dependent child or student, the family income thresholds will also increase.
From 1 July 2022 the Government will:
Increase child care subsidies available to families with more than one child aged five and under in child care, and
Remove the $10,560 cap on the Child Care Subsidy.
The Government has announced new and expanded programs to assist Australians to buy a home.
The Government will guarantee 10,000 single parents with dependants to enable them to access a home loan with a deposit as low as 2% under the Family Home Guarantee. Eligibility requirements will be applicable
The First Home Loan Deposit Scheme will be extended by another 10,000 places from 1 July 2021 to 30 June 2022. Eligibility requirements are applicable
The first home super saver (FHSS) scheme allows you to save money for your first home inside your super fund, enabling you to save faster by accessing the concessional tax treatment of superannuation. The Government has announced that the current maximum releasable amount of $30,000 will increase to $50,000.
The Government has committed an additional $500 million to extend the JobTrainer Fund by a further 163,000 places and extend the program until 31 December 2022.
The Government will provide a full income tax exemption for the pay and allowances of Australian Defence Force (ADF) personnel deployed to Operation Paladin. Operation Paladin is Australia’s contribution to the United Nations Truce Supervision Organisation, with ADF personnel deployed in Israel, Jordan, Syria, Lebanon and Egypt.
Your Superannuation
Individuals aged 67 to 74 years will be able to make or receive non-concessional or salary sacrifice superannuation contributions without meeting the work test. The contributions are subject to existing contribution caps and include contributions under the bring-forward rule. Personal concessional contributions will remain subject to the ‘work test’ for those aged between 67-74.
The government has expanded access to ‘downsizer contributions from the sale of a family home. The eligibility age to access downsizer contributions will decrease from 65 years of age to 60.
The residency rules for Self Managed Superannuation Funds (SMSFs) and small APRA regulated funds (SAFs) will be relaxed by extending the central control and management test safe harbour from two to five years for SMSFs, and removing the active member test for both fund types.
Business & Employers
Businesses with an aggregated turnover of less than $5 billion will be able to continue to fully expense the cost of new depreciable assets and the cost of improvements to existing eligible assets in the first year of use. Introduced in the 2020-21 Budget, this measure will enable an asset’s cost to continue to be fully deductible upfront rather than being claimed over the asset’s life, regardless of the cost of the asset. The extension means that the rules can apply to assets that are first used or installed ready for use by 30 June 2023.
Companies with an aggregated turnover of less than $5 billion will be able to carry back losses from the 2019-20, 2020-21, 2021-22 and 2022-23 income years to offset previously taxed profits in the 2018-19, 2019-20, 2020-21 and 2021-22 income years.
Currently, employees need to earn $450 per month to be eligible to be paid the superannuation guarantee. This threshold will be removed so all employees will be paid super guarantee regardless of their income earned.
Boosting Apprenticeship Commencements provides a 50% wage subsidy to employers and Group Training Organisations to take on new apprentices and trainees. The measure will uncap the number of eligible places and increase the duration of the 50% wage subsidy to 12 months from the date an apprentice or trainee commences with their employer.
For a look at CPA’s winners and losers of the 2021-22 Federal budget, please click here.
If you would like further information or to discuss how any of these changes may effect you, please contact our office on 02 9907 3488.