2021 Federal Budget: A Summary of Key Measures
The budget handed down by the Federal Government on 11th May 2021 continued the focus that has existed for the last 12 months: Rebuild and Recovery. As we continue to navigate COVID, the Federal Government has focused their 2021 budget on relief measures to assist families and businesses while starting to rebuild their reserves.
Below is a summary of the key areas that will impact both individuals and business as we move into the 2022 financial year and beyond.
INDIVIDUAL CHANGES
To support household income and create more jobs, the Government is retaining the low and middle income tax offset (LMITO) in 2021-22 worth up to $1,080 for individuals or $2,160 for dual income couples. Please note that this is a REBATEABLE OFFSET and the rebate is pro-rated depending on taxable income. If your taxable income is between $37,001 and $126,000 you will get some or all of the low and middle income tax offset.
From 1 July 2021, $10,000 guarantees will be made available over four years to eligible single parents with dependants to build a new home or purchase an existing home with a deposit of as little as two per cent. This will be subject to an individual’s ability to service a loan, and the government will guarantee up to 18 per cent of the loan.
The Government will allow a deduction on the first $250 of a prescribed course of education expense, which is currently not deductible, from the first income year after the date of Royal Assent of the enabling legislation. This means that if legislation is enacted before 30 June 2021, all self-education expenses relating to a prescribed course of education would be deductible in the 2021-22 tax year.
The Medicare levy low-income thresholds for singles, families, seniors and pensioners will increase from the 2020-21 income tax year as follows:
Individuals $23,226 (increased from $22,801)
Families $39,167 (increased from $38,474), with an additional $3,597 for each dependent child or student (increased from $3,533)
Single seniors and pensioners $36,705 (increased from $36,056), and
The family threshold for seniors and pensioners will be increased to $51,094 (increased from $50,191) plus $3,597 for each dependent child or student (increased from $3,533).
From 1 July 2021, the new increased superannuation contribution caps will be:
Concessional contributions - $27,500.00
Non-concessional contributions - $110,000
BUSINESS CHANGES
Temporary full expensing will now be available until 30 June 2023. Temporary full expensing allows eligible businesses with aggregated annual turnover or total income of up to $5 billion to deduct the full cost of eligible depreciable assets. Assets must be acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023.
Wage Subsidy expansion: Extension of the existing 50 per cent wage subsidy program for new apprentices and trainees employed from 5 October 2020 to 31 March 2022. The measure will uncap the number of eligible places and increase the duration of the subsidy to 12 months from the date an apprentice or trainee commences with their employer.
The Government SME Loan scheme will be expanded to take loans up to $5 million to help business refinance their existing loans. The scheme is only open to recipients of JobKeeper between 4 January 2021 and 28 March 2021, specifically small and medium-sized businesses with up to $250 million turnover. Under the recently announced expansion of the scheme:
the size of eligible loans will increase from $1 million to $5 million.
The loan terms will double from five to 10 years, and lenders will be able to offer borrowers a repayment holiday of up to 24 months.
Interest rates on loans are determined by lenders, but there will be a cap of around 7.5 per cent.
Loans will be available from 1 April 2021 and must be approved before 31 December 2021.
Temporary loss carry-back will also be extended by one year. This will allow eligible companies to carry-back tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 income year. Companies with aggregated annual turnover of up to $5 billion can apply tax losses incurred during the 2019-20, 2020-21, 2021-22 and now the 2022-23 income years to offset tax paid in 2018-19 or later years. The tax refund will be available to companies when they lodge their 2020-21, 2021-22 and now 2022-23 tax returns.
CHANGES WITH EFFECT FROM FUTURE FINANCIAL YEARS
From 1 July 2022, the Government will remove the $450 per month low income threshold that currently applies for superannuation guarantee. This means that employees that earn less than $450 in a month will now be entitled to receive superannuation contributions from their employer.
From 1 July 2022, the minimum age for the downsizer contribution will be lowered from 65 to 60. This will allow Australians nearing retirement to make a one-off post-tax contribution of up to $300,000 per person (or $600,000 per couple) when they sell their family home.
From 1 July 2022, the Government will increase the maximum amount of voluntary contributions that can be released under the First Home Super Saver Scheme from $30,000 to $50,000.
Families earning more than $189,390 will have the $10,560 annual subsidy cap for childcare removed, under changes set to come into effect in July 2022.
In welcome news for retirees, the work test will be abolished on 1 July 2022, meaning retirees aged between 67 and 74 can add to their super without having to satisfy any test. Currently, concessional or non-concessional contributions can only be made for those who are employed for at least 40 hours in a consecutive 30-day period during the financial year in which the contribution was made.