Following Treasurer Josh Frydenberg handing down the 2021-22 Federal Budget on Tuesday 11th May, we’ve broken it down to find out what it means for you.
Abolishment of the $450 Threshold
Under the current legislation, employers are not required to pay the superannuation guarantee to their employees if they earn less than $450 per month. The Government has announced that they are planning to abolish the superannuation guarantee threshold of $450 per month. The Government has put forward that they expect this change to receive Royal Ascent prior to 1 July 2022 and will begin the first financial year after receiving Royal Ascent.
Increase in Super Guarantee Contributions
In the wake of COVID-19, it was expected that the Government may announce a delay in the scheduled increase to the superannuation guarantee rate from 9.5% to 10% as part of the Budget.
As no announcement was made, it would appear that this increase will take effect as legislated on 1 July 2021.
Changes to the Work Test
Currently, the work test states that once you are 67, you must show that you have worked 40 hours or more in a 30 day period within the financial year to make voluntary superannuation contributions. The change that the Government has proposed in the Budget will see individuals aged between 67-74 wanting to make non-concessional contributions or salary sacrifice contributions, no longer needing to meet the work test.
The work test will still apply to those over the age of 67 who want to make personal tax-deductible contributions.
The Government expects that this will begin the first financial year after receiving Royal Ascent and that Royal Ascent will be received prior to 1 July 2022.
Reducing the eligibility age for downsizer contributions
The Government will reduce the eligibility age to make downsizer contributions into superannuation from 65 to 60 years of age.
The downsizer scheme allows a person to make a one-off, post-tax contribution of up to $300, 000 to their superannuation from the sale of their home, provided they have lived there for 10 years. Both members of a couple can respect the same home, and contributions do not count towards non-concessional contribution caps.
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.
TAX FOR BUSINESS
Temporary full expensing extension – extended until 30 June 2023
Businesses with an aggregated annual turnover within the relevant threshold will be able to deduct the full cost of eligible capital assets acquired after 6 October 2020 (Budget night) and first used or installed by 30 June 2023 (extended from 30 June 2022).
For Small to medium businesses with less than $50 million in aggregated turnover, full expensing applies to the cost of new and second-hand assets.
Extending temporary loss carry-back – to include the 2022-23 financial year
Tax refunds resulting from loss carry-back will be available to companies when they lodge their 2020–2021, 2021– 2022 and now 2022–2023 tax returns.
The tax refund is limited to the extent of earlier taxed profit and cannot result in a franking account deficit (i.e. if you have already paid out the prior year profits as dividends, there will be no tax refund).
PERSONAL INCOME TAX
Low- and middle-income offset extension
The Government announced in the Budget that the low- and middle-income tax offset (LMITO) will continue to apply for the 2021–2022 income year.
This offset results in a refund of between $255.00 to $1,080.00 for each eligible individual earning up to $126,000 per annum.
Apprentice / Trainee Scheme
The Government has announced that they will be extending the Boosting Apprenticeship Commencements program (originally due to finish on 30 September 2021).
- The Government is spending an additional $2.7 billion to extend the Boosting Apprenticeship Commencements program.
- The Government will pay a 50% wage subsidy over 12 months for commencing apprentices or trainees employed by 31 March 2022.
- The subsidy is capped at $7,000 per quarter per apprentice/trainee.
Currently, the first $250 of expenses relating to self-education expenses are not tax-deductible. The Government will remove this exclusion in the 2021-22 financial year.
The Government will commit an additional $500 million to be matched by State and Territory Governments to expand the JobTrainer Fund by a further 163,000 places and extend the program until 31 December 2022. The fund will support training in digital skills and upskilling in critical industries like Aged Care.
Reforms and additional funding of $129.8 million for the New Business Assistance with New Enterprise Incentive Scheme (NEIS), Exploring Being My Own Boss Workshops, and Entrepreneurship Facilitators will make self-employment support more flexible and easier for job seekers and existing micro-business owners to access.
A broader range of services will be offered, including:
- Small business workshops;
- Formal business training; and
- Other business support like idea generation, planning, and business health checks.
Child Care Subsidy
The Child Care Subsidy will be increased by 30 percentage points for the second or subsequent child (under 5 years), up to a cap of 95 per cent, and the annual cap of $10,560 per child will be removed.
Unfortunately, this measure will not commence until July 2022, the Government blaming technical issues.
These reforms will ensure that the Child Care Subsidy helps families to make employment and care choices that work best for them.
New Home Guarantee
Building on the success of the First Home Loan Deposit Scheme, the Government is temporarily expanding the Scheme by releasing a further 10,000 New Home Guarantees in 2021‑22.
The New Home Guarantees will be made available from 1 July 2021 to 30 June 2022, enabling more first home buyers to build a new home or purchase a newly built home and enter the housing market sooner with a deposit of as little as 5 per cent.
First Home Super Saver Scheme
Under the expanded First Home Super Saver Scheme, eligible first home buyers will be able to release up to $50,000 in eligible superannuation contributions to bolster their deposit.
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.
However, the Government has not announced that it intends to increase the $15,000 annual voluntary contribution limit. Therefore, a member would need to contribute over four-plus years to take maximum advantage of the scheme under this proposal.
The increase in maximum releasable amount will apply from the start of the first financial year after Royal Assent of the enabling legislation, which the Government expects will have occurred by 1 July 2022.