2021-22 Federal Budget Update text overlays Parliament House

The 2021-22 Federal Budget announcements are looking promising for the future-building of our economy. We’ve summarised some of the most notable changes for businesses and individuals below.

 

Changes for Businesses

 

Temporary full expensing extension

In the 2021/22 Federal Budget, the Government has announced that temporary full expensing will be extended by 12 months to allow eligible businesses (with aggregated annual turnover or total income of less than $5 billion) to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023

All other elements will remain unchanged, including the alternative eligibility test based on total income, which will continue to be available to businesses.

*Source: National Tax & Accountants’ Association: 11th May 2021.

 

Temporary loss carry-back extension

The Government has announced the extension of the loss carry-back measure to allow eligible companies (i.e., with aggregated turnover of less than $5 billion) to also carry back (utilise) tax losses from the 2023 income year to offset previously taxed profits as far back as the 2019 income year when they lodge their tax return for the 2023 income year.

Consistent with the current law, the tax refund available under this measure is limited by requiring that the amount carried back is not more than the earlier taxed profits and does not generate a franking account deficit. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.

*Source: National Tax & Accountants’ Association: 11th May 2021.

 

Debt recovery for small business

The Government has announced that it will allow small business entities (including individuals carrying on a business) with an aggregated turnover of less than $10 million per year to apply to the Small Business Taxation Division of the Administrative Appeals Tribunal (the ‘Tribunal’) to pause or modify ATO debt recovery actions, such as garnishee notices and the recovery of general interest charge or related penalties, where the debt is being disputed in the Tribunal.

Currently, small businesses are only able to pause or modify ATO debt recovery actions through the court system, which can be costly and time-consuming.

*Source: National Tax & Accountants’ Association: 11th May 2021.

 

Changes to superannuation

Removing the work test for voluntary contributions

The Government has announced that it will allow individuals aged 67 to 74 years (inclusive) to make or receive non-concessional contributions (including under the bring-forward rule) and salary sacrifice contributions without meeting the work test, subject to existing contribution caps.

Individuals aged 67 to 74 years (inclusive) will still have to meet the work test to make personal deductible contributions. The measure will have effect from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects to have occurred prior to 1 July 2022.

*Source: National Tax & Accountants’ Association: 11th May 2021.

 

Removing the $450 per month threshold for Superannuation Guarantee (‘SG’) eligibility

The Government will remove the current $450 per month minimum income threshold, under which employees do not have to be paid SG contributions by their employer.

The effect of this change is that around 300,000 individuals will receive additional superannuation guarantee payments each month.

*Source: National Tax & Accountants’ Association: 11th May 2021.

 

Relaxing the residency requirements for Self-managed Superannuation Funds (‘SMSFs’)

The Government will relax residency requirements for SMSFs and small APRA-regulated funds by:

  • Extending the central control and management test safe harbour from two years to five years for SMSFs; and
  • Removing the active member test for both types of funds.

This measure will allow SMSF members and small APRA fund members to continue to contribute to their superannuation fund whilst temporarily overseas, ensuring parity with members of large APRA regulated funds.

*Source: National Tax & Accountants’ Association: 11th May 2021.

 

Supporting Credit for Small and Medium Enterprises (SMEs)

The Australian Government is providing continuing support to SMEs through the SME Recovery Loan Scheme. This support will assist firms that received JobKeeper in the March quarter 2021 and firms that are eligible flood-affected businesses. By enhancing lenders’ ability to provide cheaper credit, the Scheme will assist SMEs access to vital funding to recover and invest for the future.

*Source: https://budget.gov.au/2021-22/content/download/glossy_overview.pdf (Page 17).

 

Boosting Apprenticeship Commencements wage subsidy expansion

Through the subsidy, any business or Group Training Organisation that engages an Australian Apprentice between 5 October 2020 and 31 March 2022 may be eligible for a subsidy of 50% of wages paid to a new or recommencing apprentice or trainee for a 12-month period from the date of commencement, to a maximum of $7,000 per quarter. There is no cap on the number of eligible trainees/apprentices.

An additional 5,000 Gateway Services places have been made available to women interested in undertaking an apprenticeship in a non-traditional trade occupation. In-Training Support services will also be guaranteed for women starting in non-traditional trade occupations.

*Source: https://www.dese.gov.au/boosting-apprenticeship-commencements (2021).

 

Changes for Individuals

 

Personal income tax changes

Retaining the Low and Middle Income Tax Offset (‘LMITO’) for the 2022 income year

The Government has announced that it will retain the LMITO for one more income year, so that it will still be available for the 2022 income year. Under current legislation, the LMITO was due to be removed from 1 July 2021.

The LMITO is a non-refundable tax offset that provides tax relief for low and middle-income taxpayers and is available in addition to the Low Income Tax Offset (‘LITO’). The LMITO is proposed to apply as follows for the 2022 income year.

Consistent with current arrangements, the LMITO will be applied to reduce the tax payable by individuals when they lodge their tax returns for the 2022 income year.

Proposed LMITO for 2022

*Source: National Tax & Accountants’ Association: 11th May 2021.

 

Increasing the Medicare levy low-income thresholds

The Government will increase the Medicare levy low-income thresholds for singles, families and seniors and pensioners for the 2021 income year, as follows:

  • The threshold for singles will be increased from $22,801 to $23,226.
  • The family threshold will be increased from $38,474 to $39,167.
  • The threshold for single seniors and pensioners will be increased from $36,056 to $36,705.
  • The family threshold for seniors and pensioners will be increased from $50,191 to $51,094.
  • For each dependent child or student, the family income thresholds increase by a further $3,597, up from the previous amount of $3,533.

*Source: National Tax & Accountants’ Association: 11th May 2021.

 

Reducing compliance costs for individuals claiming self-education expense deductions

The Government will remove the exclusion of the first $250 of deductions for prescribed courses of education.

Currently, the first $250 of a prescribed course of education expense is not tax deductible. Removing this $250 exclusion is expected to reduce compliance costs for individuals claiming self-education expense deductions.

This measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.

*Source: National Tax & Accountants’ Association: 11th May 2021.

 

Affordable Child Care

The Government is investing an additional $1.7 billion in child care, to increase the subsidy for the second and subsequent child. The annual cap will also be removed from 1 July 2022

Reducing disincentives to work will add up to 300,000 hours of work per week to the Australian economy, the equivalent of around 40,000 individuals working an extra day per week. This change is expected to boost the level of GDP by up to $1.5 billion per year, with 250,000 Australian families expected to benefit. 

This builds on the Government’s existing funding for women to participate in the workforce, including $9.7 billion in annual child care support, $2.3 billion in annual paid parental leave and a further $359.4 million through the 2018 and 2020 Women’s Economic Security Statements. 

*Source: https://budget.gov.au/2021-22/content/download/glossy_overview.pdf (Page 36).

 

Housing Package

New Home Guarantee Expansion

Recognising the importance of the residential construction sector in driving jobs and economic growth, the Government is providing a further 10,000 places under the New Home Guarantee in 2021-22, specifically for first home buyers seeking to build a new home or purchase a newly built home with a deposit of as little as 5%.

*Source: https://budget.gov.au/2021-22/content/download/glossy_overview.pdf (Page 18).

 

HomeBuilder Extension

HomeBuilder has been a highly successful program, supporting construction activity and jobs. Over 120,000 Australians have applied for the HomeBuilder grant, which is expected to support over $30 billion in residential construction activity. The Government extended the six-month construction commencement period to 18 months for all existing applicants, which will smooth out the HomeBuilder construction activity in 2021 and into 2022.

*Source: https://budget.gov.au/2021-22/content/download/glossy_overview.pdf (Page 18).

 

Family Home Guarantee 

Building on the success of the First Home Loan Deposit Scheme and the New Home Guarantee, HomeBuilder has successfully supported jobs and residential construction activity. Now, the Government is providing a pathway to home ownership to support single parents with dependants, regardless of whether they are a first home buyer or a previous owner-occupier.

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 2%, subject to an individual’s ability to service a loan.

*Source: https://budget.gov.au/2021-22/content/download/glossy_overview.pdf (Page 18 – 19).

 

First Home Super Saver Scheme Increase

 

The Government is helping first home buyers achieve their dream of home ownership sooner under the First Home Super Saver Scheme. The Government understands that saving a deposit is one of the hardest parts of getting into homeownership. 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.

*Source: https://budget.gov.au/2021-22/content/download/glossy_overview.pdf (Page 19).

 

Reducing the age limit for downsizer contributions

The Government will reduce the age limit from which downsizer contributions can be made by eligible individuals, from 65 to 60 years of age. The measure will have effect from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects to have occurred prior to 1 July 2022. The downsizer contribution allows eligible individuals to make a one-off, after-tax contribution to their superannuation fund, of up to $300,000 per person, following the disposal of an eligible dwelling, where certain conditions are satisfied. Under the current requirements, an individual must be at least 65 years of age at the time of making the relevant contribution, for the contribution to qualify as a downsizer contribution. 

*Source: National Tax & Accountants’ Association: 11th May 2021.

 

Changes to the First Home Super Saver (‘FHSS’) scheme

Increasing the maximum releasable amount to $50,000

The Government will increase the maximum releasable amount of voluntary concessional and non concessional contributions under the FHSS scheme from $30,000 to $50,000, to assist first home buyers in raising a deposit more quickly. 

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. This change will apply from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects will have occurred by 1 July 2022

Under the current FHSS scheme, an eligible individual can apply to have a maximum of $15,000 of their voluntary contributions from any one income year included in their eligible contributions to be released under the FHSS scheme, up to a total of $30,000 contributions across all years, together with an amount of earnings that relate to those contributions.

*Source: National Tax & Accountants’ Association: 11th May 2021.

 

Changes to improve the operation of the FHSS scheme

The Government will make four technical changes to the legislation underpinning the FHSS scheme to improve its operation as well as the experience of first home buyers using the scheme. These four changes will apply retrospectively from 1 July 2018, and will assist FHSS scheme applicants who make errors on their FHSS scheme release applications by: 

  • Increasing the discretion of the Commissioner of Taxation to amend and revoke FHSS scheme applications; 
  • Allowing individuals to withdraw or amend their applications before receiving a FHSS scheme amount, and allow those who withdraw to re-apply for FHSS scheme releases in the future; 
  • Allowing the Commissioner of Taxation to return any released FHSS scheme money to superannuation funds, provided that the money has not yet been released to the individual; and 
  • Clarifying that the money returned by the Commissioner of Taxation to superannuation funds is treated as a fund’s non-assessable non-exempt income and does not count towards the individual’s contribution caps.

*Source: National Tax & Accountants’ Association: 11th May 2021.

 

For more information on the 2021-22 Federal Budget, and how these changes may affect you and your business, get in touch today.

If you have any questions about what the 2021-22 Federal Budget means for your business or to find out if you’re eligible for tax concessions or wage subsidies, Simmons Livingstone and Associates business advisors are here to help.



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