Federal Budget 2021-22

Get the bottom line from our experts and find out what the 2021-22 Budget might mean for you.

Federal Budget 2020-21 Overview

It’s amazing how quickly things can change. Within months the world and economy went into hibernation due to COVID. Governments around the work spent big on economic stimulus to avoid a global recession.

Here in Australia we saw the introduction of JobKeeper and the Cash Flow Boost for employers – all of which was much needed for small business.

This Federal Budget continues with the economic recovery theme. With JobKeeper and the other COVID stimulus incentives coming to an end it is private sector that must now pick up the slack. We all know that private sector growth is essential for a strong economy and sustainable future. On offer are business incentives, tax cuts and policies to promote new industries and new jobs.

Key business and tax measures

Retaining low income tax offset (LITO) and the low and middle incometax offset (LMITO) for the 2021-22 income year

Good news for taxpayers with the welcome change to see the Government retaining the LITO and LMITO for the 2021-22 income year.

The low and middle income tax offset of $1,080 and low income tax offset of $700 will apply for 2021-22 and 2020-21.

How much will you receive:

Taxable Income Amount of offset you get
$0 – $37,500 Up to $255
$37,001 – $48,000 Up to $255 +7.5 c for every dollar above $37,000 (to maximum of $1,080)
$48,000 – $90,000 $1,080
$90,000 – $126,000 $1,080 – 3 c for every dollar above $90,000

Temporary full expensing and temporary loss carry-back extended by one year

The Government will extend the 12 month temporary full expensing measure. Business with an annual turnover under $5b can deduct the full cost of eligible capital assets acquired from 6 October 2020 and first used or installed ready for use by 30 June 2023 (previously up until 30 June 2022).

For businesses with an aggregated turnover of less than $50 million, temporary full expensing also applies to the business portion of eligible second-hand depreciating assets.

Businesses can also immediately deduct the business portion of the cost of improvements to eligible depreciating assets (and to assets acquired before  6 October 2020 that would otherwise be eligible assets) if those costs are incurred between 6 October 2020 and 30 June 2023.

If you are a small business that chooses to use the simplified depreciation rules, you apply the temporary full expensing rules with some modifications. This includes deducting the balance of your small business pool at the end of an income year ending between 6 October 2020 and 30 June 2023.

Which means you are effectively writing off the balance of your plant & equipment as a full expense in either the 2021, 2022 or 2023 financial years.

Remember the depreciation car limit still applies – so speak with us before considering an asset purchase.

To complement the extension of the temporary full expensing measure, temporary loss carry-back will also be extended by one year.

This will allow eligible entities (Companies – not Trusts, Partnerships or other structures) with less than $5b turnover to carry-back tax losses from 2019-20, 2020-21, 2021-22 and now the 2022-23 income year to offset previously taxed profits as far as the 2018-2019 income year. The amount of the tax offset is limited by the tax liabilities in the earlier gain years and the franking account balance at the end of the year in which the loss carry back tax offset is claimed.

Both of these measure were introduced in last years federal budget – to find out more click here

SME Recovery Loan Scheme

The SME Recovery Loan Scheme which provides participating lenders with a guarantee for 80 percent of secured or unsecured loans of up to $5 million for a term of up to 10 years with interest capped at 7.50% will be extended for small to medium enterprise that:

  1. Have a turnover of up to $250 million;
  2. Were located in a disaster declared areas in respect of the March 2021 flood in NSW or received JobKeeper for the March 2021 quarter

Loans will be made available from 1 April 2021 until 31 December 2021.

Increase in First Home Super Saver Scheme

In a measure designed to help first time home buyers to save a deposit more quickly, the Government will increase the maximum releasable amount of voluntaryconcessional and non-concessional contributions under the existing First Home Super Saver Scheme (FHSSS) from $30,000 to $50,000.

Further, 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.

There will also be the introduction of the Family Home Guarantee scheme with 10,000 places to support single parents to enter the housing market with a deposit of as little as 2 per cent.

Work-test for voluntary super contributions removed

The Government will remove the “work-test”for individuals aged 67 to 74 years, allowing them to make non-concessional (voluntary) contributions without needing to be gainfully employed at anytime during the financial year of the contribution.

Removing the work-test with allow older Australians to better save for retirement and take advantage of the concessional super tax rates.

We see two key opportunities from this measure:

  1. Ability to use a re-contribution strategy to reduce the taxable component of your superannuation. This can significantly reduce the tax burden for the beneficiaries of your estate after death;
  2. Ability to restructure personal investments to take advantage of the tax-free exempt earnings within superannuation i.e. potentially pay no income tax on your investment income.

It is also proposed that the “Downsizer” super contribution age requirement will be reduced from 65 to 60 years of age. In this measure older Australians looking to downsize their homes can contribute up to $300,000 to superannuation outside the normal non-concessional cap of $100,000 – which allows them to contribute more to superannuation.

Superannuation Guarantee income threshold removed

In a move to improve the fairness of the superannuation system for those on low incomes (women in particular), the Government will remove the current $450 per month threshold under which employers are not required to pay someone superannuation guarantee at the rate of 9.50%. The budget estimates that this could result in 300,000 individuals receiving superannuation support that would have normally been ineligible (63 per cent of whom are women).

From 1 July 2021 superannuation guarantee will increase from 9.50% to 10%

Simplified self-education expenses

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

Currently the first $250 of education expense is not tax deductible. It is expected the removal of this threshold will reduce compliance costs for claiming educational expenses.

Boosting Apprenticeship commencements – wage subsidy

The Boosting Apprenticeship Commencement Wages Subsidy will be expanded to by uncapping the number of eligible places and increasing the duration of the subsidy to 12 months from the date of an apprentice or trainee commencing with their employer.

From 5 October 2020 to 31 March 2022, eligible businesses of any size will be reimbursed up to 50 per cent of an apprentice or trainee’s wages of up to $7,000 per quarter for 12 months.

Digital games tax offset

The Government has announced that it will introduce a 30 per cent refundable tax offset for eligible businesses that spend a minimum of $500,000 on qualifying games expenditure to support development of digital games in Australia.

Childcare

An additional $1.7 billion will be provided for child care to encourage greater workforce participation and reduce the cost for approximately 250,000 families.

The Goverment proposes to amended the child care subsidy as follows:

  1. Increase the subsidies available to families with more than one child aged five and under in child care – for a second child and subsequent the level will be will increase 30 percentage points to a maximum of 95 per cent – from 11 July 2022
  2. Remove the $10,560 cap on child care subsidy for families with family income of $189,391 to $353,679 – from 1 July 2022

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