The Federal Budget has been announced!!
We have created a wrap up of the headline measures that may impact you as a business owner below. Please note as of May 2021 they are at this stage proposals, and will require legislation to be passed through both houses of Parliament.
The Federal Budget has been announced. We have created a wrap up of the headline measures that may impact you as a business owner below. Please note as of May 2021 they are at this stage proposals, and will require legislation to be passed through both houses of Parliament.
Business
Extension of loss carry-back – A company that has a annual turnover of up to $5 billion, can currently carry back a tax loss from 2019/20, 2020/21 and 2021/22. This will be extended to include the 2022/23 income yeargiving a greater scope to carry-back losses and offset them against previous years tax paid. This could result in a refundable tax offset.
Temporary full expensing– depreciation will be extended by one year to 30 June 2023, providing eligible businesses with more time to access this incentive. If eligible full expensing allows businesses to deduct the full cost of depreciating assets rather than having to claim depreciation deductions over a number of years and will increase cash flow.
Loan scheme extension for small business– Extension includes an increased government guarantee of 80%, maximum loan size of $5 million, up to 10 years with interest rates capped at approximately 7.5%. Repayment holidays are on offer for up to 24 months. The Scheme is available to SMEs with a turnover of up to $250 million that were recipients of the JobKeeper payment between 4 January 2021 and 28 March 2021. Also accessible are those impacted by the floods in eligible Local Government Areas in March 2021.
Tax exemption for storm and flood grants–Grants are available to small businesses affected by the storms and floods in Australia in early 2021 and will be made income tax exempt. The grants must relate to rainfall events between 19 February 2021 and 31 March 2021. These include small business recovery grants of up to $50,000, as well as primary producer recovery grants of up to $75,000.
Small business ATO debt recovery action– Small businesses engaged in debt disputes can apply to pause or modify ATO debt recovery. Actions linked to the dispute (such as garnishee notices) can be paused until the dispute is resolved in the Administrative Appeals Tribunal (AAT). Currently they are only able to do this through the court system, which is an expensive and lengthy process.
Self-assessment of intangible assets – businesses will be able to depreciate assets more quickly as they are now allowed to self-assess the effective life of certain intangible assets. Currently they are required to use the effective life currently prescribed by law. 30% digital games tax offset– tax incentives will be provided to stimulate investment in digital technologies, including a 30% Digital Games Tax Offset for businesses that spend a minimum of $500,000 on qualifying Australian games expenditure. This will be available from 1 July 2022. However, games with gambling elements will not be eligible.
Individuals
Tax relief – the low and middle-income tax offset (LMITO) will be extended for another year. It was due to expire on 31 June 2021 which would have meant an increase in taxation for those earning less than $126,000.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, the LMITO phases out at a rate of 3 cents per dollar.
Tax rates unchanged– individual income tax rates are unchanged for the coming financial year (2021/22), with the next round of tax cuts not currently due to commence until 1 July 2024.
Reducing self-education compliance costs –the Budget removes the exclusion of the first $250 of deductions for prescribed courses of education. This will simplify the tax return process and reduce compliance costs for individuals claiming self-education expense deductions.This will apply from the date of the enabling legislation.
Tax residency rules– the individual tax residency rules will be simplified. A person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident. Individuals who do not meet the primary test will be subject to secondary tests that depend on physical presence and measurable, objective criteria.
Childcare relief– from 1 July 2022, the government will:·increase the child care subsidies available to families with more than one child. Child must be aged 5 and under and in child care. An additional 30% for every second and third child ·remove the $10,560 cap on the Child Care Subsidy For example, 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; while a family earning $110,000 a year will have the subsidy for their second child increase from 72% to 95% and would be $95 per week better off for 4 days of care.
Superannuation
Super guarantee increase– the superannuation guarantee rate will increase from 9.5% to 10% from 1 July 2021. Although the increase is already legislated, the government announced last year that it was subject to review and would be finalised as part of the Budget.
Super guarantee low earner exemption removed – the $450 per month eligibility threshold will be removed from 1 July 2022. Employers will need to make contributions for their low-income employees unless another exemption applies.
Work test revoked– Previously those aged at least 67, but under 75, would have to be employed for 40 hours over less than 31 continuous days to make super contributions. This will be removed from 1 July 2022. This allows better provisions for retirement by making personal contributions and salary sacrifice payments to superannuation without having to work.
First Home Saver Scheme: increasing the maximum releasable amount– the maximum amount of voluntary superannuation contributions that can be released under the First Home Super Saver (FHSS) scheme will be increased from $30,000 to $50,000. This will apply from the date of the enabling legislation, which the government anticipates will be by 1 July 2022.
Downsizer contributions: eligibility age reduced – the minimum age to make downsizer contributions into superannuation will be lowered to 60. Therefore, individuals aged 60 or over will be able to make an additional non-concessional contribution of up to $300,000 from the proceeds of selling their home. Existing contribution caps and restrictions do not apply to the downsizer contribution.
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