Federal Budget Update - Changes taking effect from 1 July 2021

Last nights Federal budget was handed down with the intention to continue the economic recovery after the impact of COVID-19 by encouraging business expenditure.

 We have noted below some of what we perceive as the most important aspects that are proposed, and have attached a more detailed summary of how those proposals may impact you (CLICK THIS LINK TO SEE DETAILED BUDGET NOTES).

We are happy to discuss any questions you may have in further detail as they progress through to legislation (most changes are earmarked for commencement in July 2022) but at the moment these are just proposals still to be debated and finalised in parliament…

 We have noted at the bottom of this message some changes that are already legislated with effect from 1 July 2021 which are also worthy of note.

 Federal Budget 2021 - Business

The ability to claim any asset purchase in full for businesses is extended to apply until 30 June 2023 (previously anticipated to cease on 30 June 2022).

There is no limit to the amount spent on equipment which can be fully expensed in a single year, other than if purchasing a motor vehicle (non commercial vehicle) in which case the limit remains approx. $59,136. 

Where a company running a business makes a tax loss (which could be the result of claiming an asset in full), there is an ability to review prior years tax paid, and carry the loss back as far as 2019 to claim back tax paid in the past. This was implemented in 2021 and initially proposed to extend through to June 2022, however its now earmarked to be extended out a further year to 30 June 2023.

A new program offering small business advice in relation to helping you to work to expand the use of your digital technology has been proposed – businesses with under 20 employees would be eligible allowing the first consult for free and discounted ongoing services – CLICK HERE

Qualifying grants made to primary producers and small businesses affected by the storms and floods will be non-assessable non-exempt income for tax purposes in relation to recent storms in Feb-March 2021.

From 5 October 2020 to 31 March 2022, businesses of any size can claim the ‘Boosting Apprenticeship Commencements wage subsidy’ for new apprentices or trainees who commence during this period. Eligible businesses will be reimbursed up to 50% of an apprentice or trainee's wages of up to $7,000 per quarter for 12 months (without any cap on the number of eligible places as there was previously).

Personal Income Tax

No changes to income tax rates proposed until 2024 (at that time reducing the tax rates from 37% and 32.5% down to 30%)

Proposed to allow the low and middle income tax offset to be extended a further year until 30 June 2022 (saving $255 for those under $37K, and a maximum of $1,080 for those on incomes between $48k - $90K)

Child Care

The cap on child care subsidies of $10,560 is proposed to be removed, and families with more than one child under 5 will be able to access up to 95% back as a child care subsidy for the second and subsequent children in care.

Home Owners

From 1 July 2021, access to home loans for single parents with as little as a 2% deposit will be backed by the government under the family Home Guarantee Scheme (with the remaining 18% normally required for the deposit being guaranteed by the government to avoid any need for Mortgage Insurance) – this is not limited to first home buyers, but required applicants to have an income under $125,000.

From 1 July 2021, a further 10,000 new positions will be provided for first home buyers to access the First home loan deposit scheme, which is similar to the above, but requires 5% deposit, with the remaining 15% guaranteed by the government to avoid Mortgage insurance.

The Home Super Saver, is another program designed to encourage first home buyers to contribute ‘additional’ super of up to $15,000 per year, which is able to be redeemed up to a maximum of $50,000 upon purchasing your first home. The scheme already exists but the limit is increasing from $30,000 to $50,000 which can be saved within super and used for the first home.

Superannuation for Employers

Employees in receipt of wages under $450 per month in the past were not entitled to any superannuation guarantee (9.5% into super on their wage) – from 1 July 2022 that $450 per month threshold is proposed to be abolished, requiring super to be paid from the first $1 of wages.

 Superannuation and Pension matters

It's proposed that you will no longer need to meet the work test after age 67 to be eligible to put ‘non concessional’ contributions into Superannuation (which you can now do up until prior to your 75th birthday). Also you will be able to use the 3 year bring forward rule to allow up to $330,000 in one financial year (which was previously limited to those aged 66 and under). You would still need to meet the 40 hours of work test within a 30 day consecutive period for any ‘personal concessional’ contributions to be made after age 67.

After age 60 (previously 65), if you sell your home after owning it for 10 years, then you’re able to contribute up to $300,000 per person (i.e. $600K per couple) into super in relation to ‘downsizing the home’ (this is on top of the non concessional and concessional limits)

General 

·    $17.7 billion over 5 years to reform aged care

·    $2.3 billion on mental health infrastructure and programs

·    $998.1m on Women’s safety to reduce and support victims of abuse

·    Newcastle to receive $66m in funding for the Airport upgrade to support longer range domestic and international services

Other Legislated changes to super (outside of the budget) – with effect from 1 July 2021

The following changes are applicable from 1 July 2021 and are already legislated but worth noting:-

There are changes to the maximum super contributions from 1 July 2021 - $25,000 concessional contributions increase to $27,500, and an increase from $100,000 per year for non concessional contributions, up to $110,000 ($330k over 3 years).

The total super balance for which a tax free pension can be paid will increase from $1.6m to $1.7m for those that have not yet commenced a pension prior to 30 June 2021.

Superannuation guarantee payable at 10% from 1 July 2021 onward (up from 9.5% currently)

As always, don’t hesitate to contact the office if we can assist or clarify in relation to any questions you have about anything related to the above.