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Summary of the Federal Budget for 2021/2020 and what it means for you and your business

For You & Your Family

Low and Middle Income Tax Offset extended Date of effect from 1 July 2021 to 30 June 2022

As widely predicted, the Low and Middle Income Tax Offset (LMITO) will be extended for another year. The LMITO provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000 and will be retained for the 2021-22 year.

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 taxable 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.

The tax offset is triggered when you lodge your tax return.

Medicare Levy Low Income Threshold

For the 2020-21 income year, the Medicare levy low-income threshold for singles will be increased to $23,226 (up from $22,801 for 2019-20). For couples with no children, the family income threshold will be increased to $39,167 (up from $38,474 for 2019-20). The additional amount of threshold for each dependent child or student will be increased to $3,597 (up from $3,533).

For single seniors and pensioners eligible for the SAPTO, the Medicare levy low-income threshold will be increased to $36,705 (up from $36,056 for 2019-20). The family threshold for seniors and pensioners will be increased to $51,094 (up from $50,191), plus $3,597 for each dependent child or student.

Childcare Subsidies 

Commencing on 1 July 2022, the Government will:

• increase the childcare subsidies available to families with more than one child aged 5 and under in childcare by adding an additional 30 percentage point subsidy for every second and third child (stated to benefit around 250,000 families);
• remove the $10,560 cap on the Child Care Subsidy (stated to benefit around 18,000 families).

The Treasurer states that, under the Government’s changes, a single parent on $65,500 with 2 children in 5 days of long day care who chooses to work a fifth day will be $71 a week better off compared to the current system. He further states that, under these changes, a family earning $110,000 a year will have the subsidy for their second child increase from 72 per cent to 95 per cent, and would be $95 per week better off for 4 days of care.

Business Tax incentives to be extended

Temporary full expensing extended to 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.

The 12-month extension will provide eligible businesses with more time to access the incentive, including projects that require longer planning times and those affected by COVID-19 related supply disruptions.

Temporary loss carry-back provision: Companies will now be permitted to carry back tax losses for an extra 12 months from the 2019/20, 2020/21, 2021/22, and now 2022/23 income years to offset previously taxed profits in 2018/19 or later income years. This too applies to businesses with an aggregated turnover of less than $5 billion.

Click here for more details on the Tax Incentives for your and your business:  https://weareaccountable.com.au/app/uploads/factsheet_tax.pdf

Superannuation

Superannuation contributions work test to be repealed from 1 July 2022

Repeal of the work test: Currently, Australians aged 67 – 74 must satisfy a work test (or the work test exemption) to be eligible to make super contributions. The work test will no longer apply when making non-concessional super contributions or salary sacrificed contributions. People in this age group will also be able to access the non-concessional bring forward arrangement, subject to meeting the relevant eligibility criteria.

Downsizer contributions age reduced 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. This improves the flexibility for Australians to contribute to their superannuation savings, and may encourage people to downsize sooner and increase the supply of family homes. Downsizer contributions can be made after the sale of a person’s principal place of residence, held for a minimum of 10 years.

Date of effect

The measure will have effect from the start of the first financial year after Royal Assent of the enabling legislation, which the Government expects to have occurred prior to 1 July 2022.

Super Guarantee $450 per month threshold to be removed from 1 July 2022:

The Superannuation Guarantee $450 per month eligibility threshold will be removed from 1 July 2022. As a result, employers will be required to make quarterly Super Guarantee contributions on behalf of such low-income employees earning less than $450 per month (unless another Super Guarantee exemption applies).

Super Guarantee: no change to legislated rate rise to 10 per cent for 2021-22

The Budget did not announce any change to the timing of the next Super Guarantee (SG) rate increase. The SG rate is currently legislated to increase from 9.5 per cent to 10 per cent from 1 July 2021, and by 0.5 per cent per year from 1 July 2022 until it reaches 12 per cent from 1 July 2025.

For more details on Superannuation click here: https://weareaccountable.com.au/app/uploads/factsheet_super.pdf

Home Ownership proposals

First Home Super Saver Scheme (FHSSS): The FHSSS, which was introduced in the 2017/18 Budget, allows people to save money for their first home inside their super. The Government will increase the maximum amount of voluntary contributions that can be released under the FHSSS from $30,000 to $50,000.

Family Home Guarantee for single parents: The Government has introduced the Family Home Guarantee as a way of providing a pathway to home ownership to support single parents with dependants. This is regardless of whether they are a first home buyer or a previous owner-occupier. From 1 July 2021, 10,000 guarantees will be made available over four years to eligible single parents with a deposit of as little as 2%, subject to an individual’s ability to service a loan.

New Home Guarantee: The Government is providing a further 10,000 places under the New Home Guarantee in 2021/22. This is specifically for first home buyers seeking to build a new home or purchase a newly built home with a deposit of as little as 5%.

Aged Care

Response to the Royal Commission into Aged Care Quality and Safety: The Government announced an additional $17.7 billion over five years for aged care. Some of the proposals include:

– 80,000 additional Home Care Packages over the next two years 

Introducing a new star rating to allow Aged Care recipients and their families to compare Aged Care providers on performance, quality and safety
– Implementing a new funding model
– Increasing the Government’s Basic Daily Fee supplement by $10 per day per resident, and
– From early 2022, informal carers and older Australians will benefit from increased funding to improve access to respite care and support through the Government’s Carer Gateway.

If you would like any more information on any of the above please give us a call on 5366 1000.