On 11 May 2021, the Federal Treasurer Josh Frydenberg announced the Federal Budget, which placed emphasis on rebuilding our economy, creating jobs and securing Australia’s future.
The focus of this Federal Budget is to “secure Australia’s economic recovery” by investing in infrastructure and skills to create more jobs and provide incentives to business to “hire, innovate and grow”. Furthermore, this Federal Budget has had a big push to promote and protect Australian women.
Below is a summary of the key personal and tax measures arising from the 2021/22 Federal Budget that may impact our clients and our Rockwellian community.
Tax rates, thresholds and offsets
The extension of the low and middle income tax offset (LMITO) for the 2021-22 income year, is welcome news for taxpayers. The LMITO provides a reduction in tax of up to $1,080. For a taxpayer with a taxable income of $37,000 or less it will reduce tax up to $255. For taxpayers with a taxable income between $37,000 and $48,000, the LMITO will reduce tax from $256 to $1,079. Taxpayers with taxable incomes between $48,000 and $90,000 will receive the full $1,080 tax offset. The LMITO will be available but phase out for those taxpayers with taxable income between $90,000 and $126,000. The Government’s legislated Personal Income Tax Plan will continue to reduce the personal income tax rate with Stage 3 abolishing the 37 per cent marginal tax rate and reducing the 32.5 per cent marginal tax rate to 30 per cent.
Family Home Guarantee for single parents.
Single parents with dependent children will be able to enter or re-enter the property market with a deposit of only 2%. The Government will provide a guarantee of 18% of the purchase price to assist single parents. This measure will be available to 10,000 people spread out over four years.
First Home Super Saver Scheme (FHSSS)
The FHSSS allows anyone wishing to save a deposit for their first home to make voluntary contributions to their superannuation fund to take advantage of the special tax treatment of superannuation. These voluntary contributions are capped at $15,000.
The new measures in this Budget will increase the cap to $50,000.
In a move to assist families, the Government has announced that it will increase the childcare subsidy for eligible families who have more than one child under five in childcare and also remove the $10,650 on the subsidy.
Temporary expensing of depreciable assets in full.
The Government has announced a 12 month extension to this measure from last year’s Budget.
Broadly, businesses with an aggregated annual turnover of less than $5 billion will be able to deduct the full cost of eligible capital assets acquired from 7.30pm 6 October 2020 AEDT and first used or installed by 30 June 2023. However, full expensing in the first year of use of the capital assets will apply to new depreciable assets and also to the costs of improvements to existing eligible assets.
Tax loss carry-back rule
The Government has announced a 12-month extension to the loss carry-back rule for tax losses from last year’s Budget. These rules allow companies to carry back losses that are incurred from the 2019-20, 2020-21 or 2021-22 income years where the company has an aggregated turnover of less than $5 billion.
Companies must elect to apply the loss carry-back rules when lodging their tax returns, and where no election is made, the general carried forward loss rules will apply.
Australian companies that create and patent medical or biotech products will receive concessional tax treatment and be taxed at 17 per cent instead of the standard tax rate of 25 or 30 per cent.
Brewers and distillers
Small brewers and distillers will benefit from larger tax breaks, in a bid to encourage more investment in the sector.
Currently, small brewers and distillers can claim a 60 per cent refund on the excise they pay, up to $100,000 annually. Under the new rules they’ll be able to claim a full refund on the excise payable, up to $350,000 annually.
ATO debt recovery
The Government has announced new powers for the Administrative Appeals Tribunal to pause or modify ATO debt recovery actions in small business disputes to assist small businesses.
Business administration – Deregulation Agenda
The Government has committed to making it easier for businesses to comply with regulatory requirements by reducing the regulatory burden for businesses interacting with government.
A flow-on from these measures will make it easier for businesses to get people into jobs and improve the future business environment.
INVESTMENT MEASURES FOR BUSINESSES
Employee share schemes
The Government will make it easier for businesses to offer employee share schemes, to enable more Australians to share in the economic value they create.
Corporate Collective Investment Vehicle
The Government has announced that it will finalise the implementation of the Corporate Collective Investment Vehicle (CCIV) regime, which was first announced in 2017.
Broadly, a CCIV is an alternative to the managed investment regime and is a public company that is limited by shares. It is structured as an umbrella fund with sub-funds, each of which may hold different assets and have different investment strategies.
The Government will provide $123.8 million over four years to support the reform of the family law system and improve access and safety for children and families.
A further $3.4 billion has been pledged to protecting women from domestic violence, boosting economic opportunities and to reduce the gender pay gap.
Digital Economy Strategy
In order promote Australia to be a leading digital economy and society by 2030, the Government has announced funding into the following areas:
- Artificial Intelligence research and development – to develop AI centres and to support SMEs to adopt and use these technologies;
- Improving digital infrastructure and skills;
- Emerging aviation technology;
- Digital Games Tax Offset to provide a 30 per cent refundable tax offset for qualifying Australian digital games expenditure ongoing from 1 July 2022;
- Improving and increasing the use of digital data to more industries such as energy and telecommunications;
- Enhancing digital Government services; and
- Improving safety, security and trust in the use of digital technologies.
The Government will announce measures to be implemented to modernise the individual tax residency rules to provide greater certainty and reduce compliance costs for individuals and their employers.
Sadly international travel is unlikely to resume until 2022.
The existing “downsizer scheme” that helps anyone aged 65 or older boost their super savings with proceeds from the sale of their family home will be extended to include people aged 60 from 1 July 2022. The scheme, allows people aged 65 or over to make a one-off contribution to their super account worth up to $300,000 after selling their home, outside of the normal rules governing the tax treatment of super.
Self-funded retirees will be able to increase their superannuation savings (through voluntary non-concessional and salary sacrificed contributions to superannuation) with the abolishment of the work test from 1 July 2022.
The Government will introduce the following measures to assist in the fight against COVID-19 include:
- Pledging $1.5 billion for COVID related health services;
- Rolling out 170 million doses of various COVID-19 vaccines;
- Pledging $523.3 million to fund COVID-19 vaccines to support Australia’s neighbouring countries;
- Assisting and protecting our healthcare workers will be bolstered by a $29.9 million investment in the National Medical Stockpile, which provides access to personal protective equipment; and
- Boosting mental health support services by $2.3 billion.
Need further Information ?
For more information on how Rockwell Bates can assist you in understanding the Federal Budget and how it can assist with your Family Law or Tax queries as well as any other related advice, please contact our office.