2021/22 Federal Budget announcements
 simplified for you by Eagle Financial

Below is a synopsis of key changes we felt most relevant, along with some of the prior year announcements that may have changed. Keep in mind some are not yet legislated and there is always a chance it may never be.

We encourage you to read the below and if you have any questions, please discuss with us before actioning to ensure relevance to your situation.

Announcement made (but not limited to) Summary What type of entity / who is this for What it means… Proposed / effective date
Low Middle Income Tax Offset (LMITO) retained Extending another year Individuals LMITO enables a $255 reduction in tax for a taxable income lower than $35,000. This offset increases on a sliding scale up to a $1,080 reduction in tax, with a taxable income for individuals of up to $126,000. 1 July 2021
Instant asset write off for businesses Write off all single asset purchases, for businesses with revenue under $5 billion Individuals, partnerships, companies and trusts operating a business

There is no longer a limit on the value of the asset purchased (previously $150,000).

Benefits include better cash flow for profitable businesses. Rather than depreciating and getting a partial expense over many years, it brings forward the depreciation to the year of purchase.

NB: Cars will continue to have a maximum of $59,136, which can be written off.

6th October 2020

(and installed by 30 June 2023)
Work test repealed for voluntary super contributions† The age for which one can access this will reduce to 67 Individuals

Individuals under 74 years (inclusive) may make non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution cap. Personal concessional contributions will remain subject to the ‘work test’ for those aged between 67-74.

Currently, those aged between 67 and 74 (inclusive) still need to meet the work test.

 1 July 2022
Tax relief for brewers and distillers Full remission of excise paid up to $350,000 per annum A brewery or distillery paying excise tax

Eligible brewers and distillers will be able to receive a full remission of any excise they pay, up to an annual cap of $350,000.

Currently, they are entitled to a refund of 60% of the excise they pay, up to an annual cap of $100,000.

 1 July 2021
Employee superannuation guarantee (SG) increase Increase by 0.5% Businesses and individual employees Compulsory employer superannuation guarantee will increase to 10% (currently 9.5%) 1 July 2021
Superannuation guarantee (SG) threshold No more threshold, SG to be paid on the first dollar of gross wages Businesses and individual employees Generally, an employee currently needs to earn at least $450 gross wage per month to be entitled to any SG contributions from an employer. This threshold will be removed. 1 July 2022
First Homes Super Savers Scheme (FHSSS) increase Increase by $20,000 Individuals Maximum amount of voluntary concessional and non-concessional contributions releasable from FHSSS accounts from $30,000 to $50,000. All 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. 1 July 2022
Super downsizer contribution age limit reduced† Eligibility age to make a downsizer contribution will go from 65 to 60 Individuals The scheme allows a one-off, post tax contribution of $300,000 per person from selling a house with contributions not counted towards the non-concessional cap 1 July 2022

Prior year budget changes, still noteworthy

Summary What type of entity / who is this for What it means… Effective date
Apprenticeship wage subsidy scheme Extended to 31 March 2021, is a 50% subsidy for apprentice wages Employers

Eligible employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wages (up to a maximum of $7,000 per quarter per eligible apprentice or trainee). Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer (not the old employer). This subsidy is only available whilst on JobKeeper (which ceased in Mach 2021).

The employer needs to undertake an eligibility assessment through their Australian Apprenticeship Support Network provider.

 1 January 2020
Apprenticeship wage subsidy scheme boost Additional 50% subsidy for newly engaged apprentice wages Employers

Similar to the above, however:

  • Available for newly engaged or reengaged apprentices between 5 October 2020 and 31 March 2022
  • Must be employed for a 12 month period
  • Final claims to be made by 31 March 2022

5 October 2020
Employee superannuation accounts ‘stapled’ when changing jobs Easing the administrative burden of employee / employer superannuation Employees and employers

The key benefit will reduce the duplication of superannuation accounts for individuals

 TBA
JobMaker Hiring Credit Incentives to hire unemployed workers Employers

Eligibility:

  • JobMaker and JobKeeper cannot overlap
  • Employee headcount must increase, when compared against 30 September 2020
  • Employee payroll must increase, when compared against 30 September 2020
  • New employee must be aged between 16 – 35 years and be receipt of income support payments for at least one of three months before starting employment

JobMaker Hiring Credit benefit:

  • $200 per week for each eligible employee aged 16 – 29
  • $100 per week for each eligible employee aged 30 – 35

Registration and claims made quarterly commencing in February 2021

 7 October 2020 (for 12 months)
Offset tax losses against previously taxed profits (AKA loss carry-back) Offset previous tax paid on profits, against current or future losses Companies operating a business

If you paid tax in the 2018-19 or later income years, you could apply tax losses during the 2019-20, 2020-21 and/or 2021-22 income years. This will then create a tax refund and will be available when lodging 2020-21 and/or 2021-22 and/or 2022-23 tax returns.

For example, if a company paid $27,500 tax on $100,000 profits in the 2018-19 year, no tax/profits in the 2019-20 year and had a $50,000 loss in the 2020-21 year, half of the $27,500 in tax paid can be refunded once the 2019-21 company tax return is lodged.

NB: be careful as the franking credit account cannot be in deficit, which is important for companies that pay dividends.

 1 July 2020
Income tax cuts (stage 1) Previously due to start in July 2022, now backdated to July 2020 Individuals

Individuals with a taxable income over $37,000, will pay less tax.

The top threshold of the 19% tax bracket will increase from $37,000 to $45,000, and the top threshold of the 32.5% tax bracket will increase from $90,000 to $120,000. As an example, in 2020-21 if your taxable income is:

  • $50,000 you will be $1,080 better off when compared to 2019-20
  • $120,000 you will be $2,430 better off when compared to 2019-20

Employees should see a benefit as early as November 2020 in wage payments.

 1 July 2020
Income tax cuts (stage 2) Future tax changes Individuals

Individuals with a taxable income over $45,000, will pay less tax.

The above stage 1 $45,000 – $120,000 32.5% bracket, will have a new upper threshold of $200,000, with a reduced 30% tax rate.

The 45% tax rate will now only be on taxable incomes more than $200,000.

 1 July 2024
Maximum member cap for SMSF’s Increase from 4 to 6 SMSF Currently, an SMSF cannot have any more than 4 members. It is proposed for this limit to increase to 6. TBA
Div 7A integrity measures Deferred start date Companies Effort to simplify integrity measures TBA

† We advise you to discuss any superannuation decisions this with our authorised representatives – Kyah Glasson is a sub-authorised representative of Eagle Financial Pty Ltd, being an Authorised Credit Representative (No. 00462720) of GPS Wealth Ltd | AFSL 254 544 | ABN 17 005 482 726 | www.gpswealth.com.au