The Treasurer, Josh Frydenberg, delivered the Federal Budget for 2021 on 11 May. The following is an update of the key tax and superannuation measures.

Personal Tax

income taxLow Income Offsets – LMITO retained for 2021-22: The low and middle income tax offset (LMITO) will continue to apply for the 2021-22 income year up to the maximum amount of $1,080. Consistent with current arrangements, the LMITO will be received with the notice of assessment after individuals lodge their tax returns for the 2021-22 income year.

Low income tax offset: The low income tax offset (LITO) will also continue to apply for 2021-22 income year. The maximum amount of the LITO is $700.

Personal Tax Rates unchanged for 2021-22; Stage 3 start from 2024-25 unchanged: In the Budget, the Government did not announce any personal tax rates changes, having already brought forward the Stage 2 tax rates to 1 July 2020 in the October 2020 Budget. The Stage 3 tax changes are expected to commence from 1 July 2024, as previously legislated.

Business Tax

Temporary full expensing extended by one year: The Government will extend the temporary full expensing measure until 30 June 2023. It was otherwise due to finish on 30 June 2022.  All other elements of temporary full expensing will remain unchanged.

money matters

Loss carry-back extended by one year: Under the loss carry back measures, an eligible company (aggregated annual turnover of up to $5 billion) could carry back a tax loss for the 2019-20, 2020-21 or 2021-22 income years to offset tax paid in the 2018-19 or later income years. The Government will extend the eligible tax loss years to include the 2022-23 income year. Tax refunds resulting from loss carry back will be available to companies when they lodge their 2020-21, 2021-22 and now 2022-23 tax returns.

Tax Exemption for grants made to businesses affected by storm and floods: The Government will provide an income tax exemption for qualifying grants made to primary producers and small businesses affected by the storms and floods in Australia. Qualifying grants are Category D grants provided under the Disaster Recovery Funding Arrangements 2018, where those grants relate to the storms and floods in Australia that occurred due to rainfall events between 19 February 2021 and 31 March 2021. These include small business recovery grants of up to $50,000 and primary producer recovery grants of up to $75,000.

Small business to be able to pause ATO debt recovery: The Government will introduce legislation to allow small businesses (aggregated turnover of less than $10 million) to pause or modify ATO debt recovery action where the debt is being disputed. Specifically, the changes will allow the Small Business Taxation Division of the AAT to pause or modify any ATO debt recovery actions – such as garnishee notices and the recovery of GIC or related penalties – until the underlying dispute is resolved. This measure is intended to provide an “avenue” for small businesses to ensure they are not required to start paying a disputed debt until the matter has been determined by the AAT.

Superannuation

Superannuation contributions work test to be repealed from 1 July 2022: The superannuation contributions work test exemption will be repealed for voluntary non-concessional and salary sacrificed contributions for those aged 67 to 74 from 1 July 2022. As a result, individuals under age 75 will be allowed to make or receive non-concessional or salary sacrifice contributions from 1 July 2022 without meeting the work test, subject to existing contribution caps. However, individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions. Currently, individuals aged 67 to 74 years can only make voluntary contributions, or receive contributions from their spouse, if they work at least 40 hours in any 30-day period in the financial year in which the contributions are made.

Super guarantee $450 per month to be repealed: The Superannuation Guarantee $450 per month eligibility threshold will be removed from 1 July 2022. As a result, employers will be required to make quarterly Super Guarantee contributions on behalf of low-income employees earning less than $450 per month (unless another Super Guarantee exemption applies).

selling propertyDownsizer contributions eligibility reduced to 60: The minimum eligibility age to make downsizer contributions into superannuation will be lowered to age 60 (down from age 65) from 1 July 2022. The proposed reduction in the eligibility age will mean that individuals aged 60 or over can make an additional non-concessional contribution of up to $300,000 from the proceeds of selling their home.  Either the individual or their spouse must have owned the home for 10 years.  The maximum downsizer contribution is $300,000 per contributor (ie $600,000 for a couple), although the entire contribution must come from the capital proceeds of the sale price. The downsizer contribution must be made within 90 days after the home changes ownership (generally the date of settlement).

First Home Super Saver Scheme to be extended for withdrawals up to $50,000: The maximum amount of voluntary superannuation contributions that can be released under the First Home Super Saver (FHSS) scheme will be increased from $30,000 to $50,000 with effect from the start of the first financial year after Royal Assent of the enabling legislation, expected to be 1 July 2022.  Voluntary contributions made from 1 July 2017 up to the existing limit of $15,000 per year will count towards the total amount able to be released (which includes voluntary concessional and non-concessional contributions).

Other Key Items in the budget.

  • Unemployment aiming for Less than 5%
  • International borders are not expected to reopen until at least mid-2022.
  • Skills Training to overcome the critical skills shortages – Government has extended the JobTrainer Scheme, allocated training places for the Aged Care sector and extended the Boosting Apprentice Commencements.
  • The Budget has added $15.6 billion in major infrastructure commitments including:
    • Mount Ousley Interchange
    • Jervis Bay Road Intersection
    • Jervis Bay Road to Sussex Inlet Road – Stage 1
  • Support for businesses helping people into work: Wage subsidies available through jobactive, Transition to Work and ParentsNext.
  • Childcare: The Commonwealth Government’s announcement of a $1.7 billion childcare package.
  • Targeted support for worst-hit sectors such as for aviation, tourism, the arts and international education.
  • Housing support for people buying homes, with packages for single parents and first home buyers.

Summary of the Federal Budget 2021 provided by South East Access: 12 May 2021

South East Access can help individuals and businesses understand these changes so if you need any support give us a call. 

Our team provide assistance with accounting, personal and business tax, financial management, payroll services and bookkeeping.

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