As we do every year, we have read through the latest Federal Budget papers and are pleased to present a summary of the key points for our clients.
Just seven months after the COVID-19 delayed 2020 Federal Budget, the Government last night presented its 2021 Budget. Buoyed by a strong economic rebound despite the pandemic, the Coalition has more money available than projected last October and despite our massive national debt caused by COVID-19, there is no stopping Government spending plans as they attempt to keep the economy going in the right direction.
Other than the key (long overdue) focus on aged care and women, key highlights most relevant to our client base are as follows:
Personal Tax Cuts
The low and middle income (‘LMITO’) tax offset has been extended a further year to 2021-2022. It provides a tax benefit of $ 1,080 for eligible taxpayers. The effect is as follows:
|Taxable Income||Tax Savings for 2021-22|
|Up to $37,000||$255|
|$90,000 – $126,000|| Reduction in LMITO of 3c for every dollar |
The way an ‘Australian resident for tax purposes’ is determined will be simplified with the primary test now being that the person is physically present in Australia for 183 days or more. If this test is failed, 4 secondary tests can be relied upon.
In a welcome change, you will no longer need to meet the Work Test to be eligible to make non-concessional super contributions and receive salary sacrifice contributions. This change will apply from 1 July 2022.
If you are aged between 67-74 you will still need to meet the Work Test to make personal deductible super contributions.
Super Guarantee Eligibility Threshold
Currently employers don’t need to pay super for employees if the employee earns less than $ 450 per month. This will be removed and all staff will be eligible to receive super, no matter how little they earn.
From 1 July 2022, people aged over 60 years will be able to make ‘downsizer’ contributions of up to $ 300,000 to super when they sell their home and downsize. Currently this measure is only available to people aged 65 and over.
12-month extension to the full expensing measures for plant and equipment
Businesses are entitled to an immediate tax deduction for depreciating assets purchased after 6 October 2020 and installed ready for use by 30 June 2022. This has now been extended to 30 June 2023.
In real terms, if you purchase an asset for your business it is now fully tax deductible if purchased and installed before 30 June 2023 (no depreciation calculations required).
We encourage clients to examine their equipment register and determine whether any items need upgrading while these measures are in place. The immediate tax benefits can be substantial and this is fantastic news for all business clients.
Loss carry back rule for companies’ extension
If a company makes a tax loss in any one of the 3 financial years covering 2020-2023, that loss can be ‘carried back’ to offset any profit made in the 2019 financial year. In effect this means the company can potentially receive a tax refund for tax previously paid in the 2019 financial year. This is designed to help companies who have experienced a delayed downturn from COVID-19.
FAMILIES & HOUSING
Fees will be reduced for working families with two or more children from 1 July 2022. There will be an increase in the childcare subsidy to a maximum of 95% for the second child and subsequent children in care. The $ 10,560 annual childcare subsidy cap for high-income earners will also be abolished.
Family Home Guarantee
This will create 10,000 places from 2021-22 to support single parents with dependants to enter or re-enter the housing market with a deposit of as little as 2 per cent of the home purchase price.
First Home Loan Deposit Scheme
Extended to provide an additional 10,000 New Home Guarantees in 2021-22 to allow eligible first home buyers to build a new home or purchase a newly constructed home sooner with a deposit of as little as 5 per cent.
First Home Super Saver Scheme
The maximum releasable amount of voluntary concessional and non-concessional contributions under this scheme will be increased from $30,000 to $50,000 with a likely start date of 1 July 2022.
We hope this summary has been informative.
Please contact us at 08 8431 7444 to discuss any aspect of how the budget is likely to affect your personal circumstances.