What You Need to Know
With the Federal Budget now released, the Government’s ultimate goal is to have the nation recover from the immense financial burdens faced as a result of the COVID crisis. The key elements being creating jobs, providing targeted support to businesses, and suppressing the spread of the virus through the rollout of the vaccine.
With Effect From 1 July 2021 / Immediate Effect:
–Tax rates for individuals have remained the same for 2021-22– 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.
– 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.
– 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.
– 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 percent, subject to an individual’s ability to service a loan, and the government will guarantee up to 18 percent of the loan.
– From 1 July 2021, all eligible brewers and distillers will receive full remission (up from 60 percent) of any excise they pay on the alcohol they produce up to a cap of $350,000 each financial year (increased from $100,000).
With Effect From Later Years:
– From 1 July 2022, individuals aged 67 to 74 will no longer be required to meet the work test when making, or receiving, non-concessional superannuation contributions or salary sacrificed contributions. However, access to concessional personal deductible contributions for individuals aged 67 to 74 will still be subject to meeting the work test.
– 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.
– Part-time workers earning less than $450 a month from an employer will finally be eligible to receive superannuation on those wages. This means employers will have to pay all their employees’ super, no matter how few hours they work.*
– The Government is removing the exclusion of the first $250 of deductions for prescribed courses of education. This will simplify the tax return process and reduce compliance costs for individuals claiming self-education expense deductions. The measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.
– The Government has removed the cessation of employment taxing point for tax-deferred Employee Share Schemes (ESS) that are available for all companies. The measure will result in tax being deferred until the earliest of the remaining taxing points:
- In the case of shares, when there is no risk of forfeiture and no restrictions on disposal
- In the case of options, when the employee exercises the option and there is no risk of forfeiting the resulting share and no restrictions on disposal
- The maximum period of deferral of 15 years.
The change to the cessation of employment taxing point will apply to ESS interests issued on or after 1 July following Royal Assent.
– The Government will replace the individual tax residency rules with a new framework that is easy to understand, provides certainty, and reduces compliance costs for globally mobile individuals and their employers. These changes will apply from 1 July following Royal Assent.
– 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.
– The Government will allow taxpayers to self-assess the effective life of certain depreciating intangible assets for tax purposes, rather than being required to use the effective life currently prescribed by statute. This will apply to eligible assets acquired following the completion of temporary full expensing, which has been extended and will now end on 30 June 2023. *
– From 1 July 2022, the Digital Games Tax Offset (DGTO) will provide eligible game developers with a 30 per cent refundable tax offset for qualifying Australian games expenditure. The DGTO will be available in the year when the qualifying expenditure has ceased on a game. The maximum DGTO a developer will be able to claim in each year is $20 million. Eligibility criteria will require minimum of $500,000 qualifying expenditure has been spent on the game.
– From 1 July 2022, the patent box will tax income derived from Australian medical and biotech patents at a 17 percent effective concessional corporate tax rate. Normally corporate income is taxed at 30 percent or 25 percent for small and medium companies.
The Prime Minister has said that ‘Australia’s approach to recovery will be technology-driven, not taxes driven with a primary focus on getting people back on their feet.
With this being said, the underlying cash balance for the government’s budget is now $52.7 billion lower than what was expected six months ago and is now expected to be a deficit of $161 billion for 2020/21.
With Australia seeming to be well on the road to recovery, if we have learned anything from last year, things can change quickly and times are still uncertain and definitely without precedent.
Make sure to keep an eye out for our series of short, informative videos that will assist in outlining how the announcements will specifically affect you and your business.