The treasurer delivered the federal budget on 11 May 2021. Below we outline the key announcements of the 2021-22 budget.
In the Budget, the Government did not announce any personal tax rates changes, having already brought forward the Stage 2 tax rates to 1 July 2020 in the October 2020 Budget. The Stage 3 tax changes will commence from 1 July 2024, as previously legislated.
The 2021-22 tax rates and income thresholds for residents are therefore unchanged from 2020-21.
The Govenment also announced in the Budget that the low and middle income tax offset (LMITO) will continue to apply for the 2021-22 income year. The LMITO was otherwise legislated to only apply until the end of the 2020-21 income year, meaning low-to-middle income earners would have seen lower tax refunds in 2022.
The amount of the LMITO is $255 for taxpayers with a taxable income of $37,000 or less. Between $37,000 and $48,000, the value of LMITO increases at a rate of 7.5 cents per dollar to the maximum amount of $1,080. Taxpayers with table incomes from $48,000 to $90,000 are eligible for the maximum LMITO of $1,080. From $90,001 to $126,000, LMITO phases out at a rate of 3 cents per dollar.
Consistent with current arrangements, the LMITO will be received on assessment after individuals lodge their tax returns for the 2021-22 income year.
The low income tax offset (LITO) will also continue to apply for the 2021-22 income year. The LITO was intended to replace the former low income and low and middle income tax offsets from 2022-23, the the new LITO was brought forward in the 2020 Budget to apply from the 2020-21 income year.
The maximum amount of the LITO is $700. The LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000, and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
The Government will remove the exclusion of the first $250 of deductions for prescribed courses of education. The first $250 of a prescribed course of education expense is currently not deductible.
The Budget confirmed that the Government will make an additional $1.7 billion investment in child care. The changes will commence on 1 July 2022 (that is, not in the next financial year). This measure was previously announced on 2 May 2021.
Commencing on 1 July 2022, the Government will:
The Government will extend the temporary full expensing measure until 30 June 2023. It was otherwise due to finish on 30 June 2022.
Other than the extended date, all other elements of temporary full expensing will remain unchanged.
Currently, temporary full expensing allows eligible businesses to deduct the full cost of eligible depreciating assets, as well as the full amount of the second element of cost. A business qualifies for temporary full expensing if it is a small business (annual aggregated turnover under $10 million) or has an annual aggregated turnover under $5 billion.
Under the temporary, Covid-driven restoration of the loss carry-back provisions announced in the previous budget, an eligible company (aggregated annual turnover of up to $5 billion) could carry back a tax loss for the 2019-20, 2020-21 or 2021-22 income years to offset tax paid in the 2018-19 or later income years.
The Government has announced it will extend this to include the 2022-23 income year. Tax refunds resulting from loss carry-back will be available to companies when they loge their 2020-21, 2021-22 and now 2022-23 tax returns.
The superannuation contributions work test exemption will be repealed for voluntary non-concessional and salary sacrificed contributions for those aged 67 to 74 from 1 July 2022.
As a result, individuals under age 75 will be allowed to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice contributions from 1 July 2022 without meeting the work test, subject to existing contribution caps. However, individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions.
Currently, individuals aged 67 to 74 years can only make voluntary contributions, or receive contributions from their spouse, if they work at least 40 hours in any 30-day period in the financial year in which the contributions are made (the “work test”). The work test age threshold previously increased from 65 to 67 from 1 July 2020 as part of the 2019-20 budget.
The minimum eligibility age to make downsizer contributions into superannuation will be lowered to age 60 (down from age 65) from 1 July 2022.
The proposed reduction in the eligibility age will mean that individuals aged 60 or over can make an additional non-concessional contribution of up to $300,000 from the proceeds of selling their home. Either the individual or their spouse must have owned the home for 10 years.
The maximum downsizer contribution is $300,000 per contributor ($600,000 for a couple), although the entire contribution must come from the capital proceeds of the sale price. As under the current rules, a downsizer contribution must be made within 90 days after the home changes ownership (generally the date of settlement).
The budget confirmed that the maximum amount of voluntary superannuation contributions that can be released under the First Home Super Saver (FHSS) scheme will be increased from $30,000 to $50,000. The Treasurer previously announced this measure on 8 May 2021.
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 (which includes voluntary concessional and non-concessional contributions.
The information contained on this website and in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website and in this article are of a general nature only and are based on our interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Client Portal
View Comments