Treasurer Josh Frydenberg handed down the 2021-22 federal budget at 7.30pm on Tuesday 11 May 2021.
The focus of the budget was on ensuring Australia’s economic recovery, with a focus on job creation, guaranteeing essential services and building a more resilient and secure Australia.
Most of the announcements were around tax cuts and large funding plans across various industries, with no tax increases as the government continues to navigate the delicate economic climate attributable to the ongoing COVID-19 pandemic.
The following is a summary of what the team at AMG believes the key announcements were:
Individual Income Tax Measures
Low and Middle-Income Tax Offset
Extension of the low and middle-income tax offset (LMITO) to 30 June 2022, worth up to $1,080 for individuals earning up to $126,000. This was previously scheduled to finish 30 June 2021.
Low- and middle-income earners will receive the LMITO as follows:
Currently, the first $250 of a prescribed course of education expense is not deductible for income tax purposes but this exclusion threshold will be removed.
Employee Share Schemes
The removal of the ‘cessation of employment’ taxing point for tax-deferred employee share schemes (ESS) that are available for all companies. The maximum period of deferral of 15 years will remain but an employee will not necessarily have to report this income as assessable when they leave employment at the company for which they have received a share interest under an ESS.
Business Tax Incentives
Extending temporary full expensing (immediate asset write-off) and temporary loss carry-back provisions through until 30 June 2023. These measures were previously scheduled to finish 30 June 2022.
Temporary Full Expensing
Under the temporary full expensing measure, businesses with an aggregated turnover of less than $5 billion can claim a full tax deduction for eligible depreciating assets.
Temporary Loss Carry-back
Under the temporary loss carry-back measure, companies with an aggregated turnover of less than $5 billion can carry back tax losses made in the 2020-2023 income years to be applied to taxable income derived in the 2019-2022 years, enabling a refund of taxes paid in past years.
Intangible Asset Depreciation
Changes to the way Australian businesses can claim depreciation of intangible assets like intellectual property and in‑house software by allowing taxpayers to determine the economic life of these assets (such as patents) for depreciation purposes.
Reminder: The corporate tax rate for base rate entities (trading Companies as opposed to investment Companies) will be decreasing from 26% to 25% effective 1 July 2021.
Improved Opportunities for Home Ownership
Family Home Guarantee
Establishment of the Family Home Guarantee which will allow single parents with dependants to purchase a home with a deposit of as little as 2%. There will be 10,000 guarantees made available over four (4) years.
New Home Guarantee
Expansion of the New Home Guarantee (part of the First Home Loan Deposit Scheme) for a 2nd year, providing an additional 10,000 places in 2021-22. First home buyers seeking to build a new home or purchase a newly built home will be able to do so with a deposit of as little as 5%.
First Home Super Saver Scheme
From 1 July 2022, increasing the maximum amount of voluntary contributions that can be released under the First Home Super Saver Scheme from $30,000 to $50,000.
Boosting Superannuation Contributions
Superannuation Guarantee for Part-time Workers Earning < $450 per Month
From 1 July 2022, employees earning less than $450 per month from a single employer will now receive the superannuation guarantee on their wages.
Reminder: The superannuation guarantee rate will be increasing from 9.5% to 10% of gross wages effective 1 July 2021.
Expansion of Superannuation Downsizer Contributions to Individuals Aged >60
Under the downsizer measure, individuals can choose to make a one off contribution of up to $300k to super from the proceeds of selling their home. This is in addition to the normal contribution caps and is expected to apply from 1 July 2022.
This measure previously only applied to individuals over the age of 65 but the age threshold will be lowered to people over the age of 60 thus expanding the eligibility to a wider demographic.
Removal of the Work Test for Individuals Aged Between 67-74
Repealing the work test for voluntary non-concessional and salary sacrificed superannuation contributions for those aged 67 to 74 from 1 July 2022. These individuals will also be able to access the non-concessional bring forward arrangement, subject to meeting the relevant eligibility criteria.
To meet the work test, you must be gainfully employed for at least 40 hours during a consecutive 30-day period in the financial year in which the contributions are made.
The work test will still apply to individuals aged 67 to 74 seeking to claim concessional personal deductible contributions.
Relaxation of the SMSF Residency Requirements
From 1 July 2022 SMSF members will be allowed to continue making superannuation contributions whilst temporarily overseas.
At present, individuals who have temporarily relocated overseas can only make contributions to large retail funds due to restrictions for SMSFs around residency requirements.
Reminder: The superannuation contribution caps will be increasing as follows effective 1 July 2021:
- Concessional contributions – $27,500 (increase from $25,000)
- Non-concessional contributions – $110,000 (increase from $100,000)
- Lifetime superannuation contributions cap – $1.7 million (increase from $1.6 million)
Child Care & Investment in Childhood Education
Child Care Subsidy Increase
A package worth $1.7 billion has been announced to make child care more affordable and boost workforce participation.
From 1 July 2022 the Government will:
- Increase the maximum child care subsidy from 85% to 95% for families with more than one child aged five and under in child care.
- Remove the $10,560 annual cap per child for the child care subsidy.
Funding for Preschools
The Government is investing $2 billion to deliver a four-year preschool funding agreement to support access for all children to at least 15 hours a week of quality learning in the year before school irrespective of where they live.
Apprentices & Trainees
Boosting Apprenticeship Commencements
Extension of the Boosting Apprenticeship Commencements program for new apprentices and trainees signed up by 31 March 2022 (previously 30 September 2021). Through the subsidy, any business or Group Training Organisation that engages an Australian Apprentice 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.
Extension of the JobTrainer Fund until 31 December 2022 and expansion with an additional 163,000 places. The JobTrainer Fund provides additional training places that are free or low fee, in areas of identified skills shortage such as health, aged and disability care, IT and trades for job seekers and young people, including school leavers.
Insolvency & Financial Hardship
With regards to assistance for businesses suffering from financial hardship the government has announced plans to:
- Make it easier for small businesses with an aggregated turnover of less than $10 million to pause or modify ATO debt recovery action by applying to the Administrative Appeals Tribunal (AAT) where the debt is being disputed in the AAT instead of having to go through the court system.
Increase the threshold at which creditors can issue a statutory demand on a company from $2,000 to $4,000.
Funding Announcements for Specific Industries
Other Major Funding Announcements
Feel free to contact our office for further details about any of the above 2021-22 budget announcements.
You can also visit the Federal Government Budget website for more information.