Chartered Accountants & Business Advisory

FEDERAL BUDGET 2021-22 REVIEW

Australian coins and bills

The Treasurer, Josh Frydenberg, delivered the Federal Budget on Tuesday 11 May 2021. Here, we have summarised many of the newly outlined measures.

These are not legislated yet, but we will be keeping a close eye on them and update you with any progress.

It’s important to know that as this is a summarised version, additional criteria may apply.

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Business

Temporary full expensing extended

  • Extending the temporary full expensing measures for 12 months until 30 June 2023. This will allow eligible businesses to deduct the full cost of eligible depreciable assets of any value acquired from 6 October 2020.

Loss carry back extended

  • The loss years will be extended to include the 2022-23 income year. Tax refunds resulting from loss carry back will be available to companies when they lodge their 2020-21, 2021-22 and now 2022-23 tax returns. Further criteria apply; however, if a company incurs a loss in any of these years, it may be eligible for a refund for any previous taxes it may have paid.

Employee share scheme

  • Removal of cessation of employment as a taxing point for the tax deferred employee share schemes.

Concessional corporate tax rate for medical and biotech patents income

  • The Government will introduce a patent box tax. It will tax corporate income derived from patents at a concessional effective corporate tax rate of 17 per cent.
  • The patent box will apply to income derived from Australian medical and biotechnology patents.

Intangible assets

  • Ability to self-assess effective life of certain intangible assets – such as intellectual property and in-house software.

Small business and ATO debt

  • The government will introduce legislation to allow small businesses to pause or modify ATO debt recovery action where the debt is being disputed in the ATAT.
Wooden blocks with letters spelt Super

Superannuation

Superannuation contributions work test

  • To be repealed from 01 July 2022 for voluntarily non-concessional and salary sacrificed contributions for those under 75. This means people may not be required to work a minimum number of hours to be able to deposit into super.

Super Guarantee threshold

  • $450 threshold to be removed from 01 July 2022, hence all employees would need to be paid super.

Downsizer Contributions

  • Eligibility age to be lowered from 65 to 60. This allows those over 60 who sell their place of residence to be able to deposit $300,000 into super from the sale of their residential property.

First Home Super Scheme

  • The maximum amount of voluntary superannuation contributions that can be released under the FHSS scheme will be increased from $30,000 to $50,000.
woman using a calculator filling up the Tax form

Personal tax

Low and middle income tax offset (LMITO)

  • LMITO offset of $1,080 will continue to apply for the 2021-2022 income year.
    • Amount of LMITO is:
      • $255 for taxable income of $37,000 or less
      • $37,000-$48,000, value of LMITO increases at a rate of 7.5 cents per dollar to the maximum amount of $1080
      • From $90,001 to $126,000, LMITO phases out at a rate of 3 cents per dollar.

Low income tax offset (LITO)

  • The low income tax offset will also continue to apply for the 2021-2022 year.
  • The maximum amount of the LITO is $700.
  • The LITO will be withdrawn at a rate of 5 cents per dollar between $37,500 and $45,000 and then at a rate of 1.5 cents per dollar thereafter.

Residency test

  • Any person who is physically present in Australia for 183 days or more in an income year will be an Australia tax resident.

Self- education expenses

  • The government will remove the exclusion of the first $250 of deductions for any relevant self- education courses.

Childcare

  • Increased subsidies from 01 July 2022 for families with more than one child aged five and under in childcare by adding an additional 30 percentage point subsidy for the second and third child.

Here to help

We understand that the information provided within the Federal Budget is highly complex. If you have any questions about the Budget announcements or you’d like to find out more about how the team at Alliance Accounting can help you and your business, please contact us today.