In May, Treasurer Josh Frydenberg delivered the 2021-22 Federal Budget. The Government’s policy priorities were announced with a focus on securing Australia’s recovery from the COVID-19 pandemic. The key themes included creating jobs, guaranteeing the essential services, and building a more secure and resilient Australia. In addition, there is also a focus on improving women’s safety and economic security. Please see below for further information on the related proposed policy measures that may be relevant for you.
Low and middle-income tax offset (LMITO)
The Government will retain the LMITO for the 2021-22 financial year—an additional financial year. For context, the LMITO provides a reduction in tax of up to $1,080:
- taxable income ?$37,000, offset of $255,
- taxable income from $37,001 to $48,000, offset of $255 plus 7.5 cents per dollar above $37,000,
- taxable income from $48,001 to $90,000, offset of $1,080, and
- taxable income from $90,001 to $126,000, offset of $1,080 minus 3 cents per dollar above $90,000.
In line with Budgets for previous financial years, the Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from 1 July 2020. The Medicare levy low-income thresholds will be increased from:
- $22,801 to $23,226 for singles,
- $38,474 to $39,167 for families*,
- $36,056 to $36,705 for single seniors and pensioners, and
- $50,191 to $51,094 for family seniors and pensioners.
*For each dependent child or student, the family income thresholds increase by a further $3,597 (previously $3,533).
- The Government will allow taxpayers to self-assess the effective life of certain depreciating intangible assets* for tax purposes, rather than being required to use the effective life currently prescribed by statute.*Patents, registered designs, copyrights, in-house software, licenses and telecommunications site access rights.
- Taxpayers will be able to bring deductions forward if they self-assess the assets as having a shorter effective life than the current statutory life. The measure will apply to eligible assets acquired, following the completion of temporary full expensing (see below), which has been extended until 30 June 2023.
Temporary full expensing
- The Government will extend temporary full expensing for 12 months until 30 June 2023. Temporary full expensing will be extended to allow eligible businesses with an aggregated annual turnover or total income of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023.
Temporary loss carry-back
- The Government will extend temporary loss carry-back by one financial year. The extension will allow eligible companies with an aggregated turnover of less than $5 billion, to carry back (utilise) tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 income year when they lodge their 2022-23 tax return.
Family Home Guarantee
- The Government will establish the Family Home Guarantee with 10,000 places from 2021-22 to support single parents with dependants to enter, or re-enter, the housing market with a 2 per cent deposit (the Government guaranteeing the remaining 18 per cent), regardless of whether that single parent is a first-home buyer or previous owner-occupier. The measure will commence on 1 July 2021, subject to the passage of legislation.
First Home Loan Deposit Scheme (FHLDS)
- The Government will extend the FHLDS to provide an additional 10,000 New Home Guarantees in 2021-22 to allow eligible first home buyers to build a new home or purchase a newly constructed home with a 5 per cent deposit (the Government guaranteeing the remaining 15 per cent).
HomeBuilder grant program
- The Government will extend the HomeBuilder grant program construction commencement period from six months to 18 months for all existing applicants
The Government will reduce child care out-of-pocket costs and support parental choice by:
- increasing the Child Care Subsidy (CCS) rate by 30 percentage points for the second child and subsequent children aged five years and under in care, up to a maximum CCS rate of 95 per cent for these children, commencing on 11 July 2022; and
- removing the CCS annual cap of $10,560 per child per year, commencing on 1 July 2022.
- The Government will remove the current $450 per month minimum income threshold, over which employees have to be paid the Superannuation Guarantee by their employer. The measure will apply from the start of the first financial year after Royal Assent of the enabling legislation—the Government expects this to occur before 1 July 2022.
- The Government will reduce the eligibility age to make downsizer contributions into superannuation from 65 to 60 years of age. The measure will apply from the start of the first financial year after Royal Assent of the enabling legislation—the Government expects this to occur before 1 July 2022.
First Home Super Saver Scheme (FHSSS)
- The Government will increase the maximum releasable amount of voluntary concessional and non-concessional contributions under the FHSSS from $30,000 to $50,000. The measure will apply from the start of the first financial year after Royal Assent of the enabling legislation—the Government expects this to occur before 1 July 2022.
- Please note: 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.
- The Government will also make four technical changes to the legislation behind the FHSSS, to assist applicants who make errors on their FHSSS release applications. One of these technical changes will allow individuals to withdraw or amend their applications prior to them receiving an FHSSS amount, and allow those who withdraw to re-apply for FHSSS releases in the future. These technical changes will apply retrospectively from 1 July 2018.
Legacy retirement products
- The Government will allow, for a two-year period, individuals to exit a specified range of legacy retirement products*, together with any associated reserves and fully access the underlying capital by commuting it to superannuation. They will then have the option to withdraw it, roll it to more flexible and contemporary retirement products and/or retain it within superannuation.
Victims of family and domestic violence
- The Government won’t proceed with a measure to extend the early release of superannuation to victims of family and domestic violence.
- The Government will allow individuals aged 67 to 74 years (inclusive) to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice contributions without meeting the work test, subject to existing contributions caps. Individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions. The measure will apply from the start of the first financial year after Royal Assent of the enabling legislation—the Government expects this to occur before 1 July 2022.
The Government will:
- release 80,000 additional Home Care Packages over two years from 2021-22.
- improve access to quality aged care services for consumers in regional, rural and remote areas, including those with Indigenous backgrounds and special needs groups.
- increase the amount of front line care (care minutes) delivered to 240,000 aged care residents and 67,000 who access respite services, by 1 October 2023. This will be mandated at 200 minutes per day, including 40 minutes with a registered nurse.
- provide support for aged care providers to deliver better care and services through a new Government-funded Basic Daily Fee supplement increase of $10 per resident per day from 1 July 2021, while continuing the 30 per cent increase in the homelessness and viability supplements.
- support structural reforms, including a new Aged Care Act to replace the Aged Care Act 1997 and the Aged Care Quality and Safety Commission Act 2018, discontinuation of the current bed license and the Aged Care Approvals Round Process from 1 July 2024, as well as the implementation of a new Refundable Accommodation Deposit (RAD) Support Loan Program to support eligible residential aged care providers to refund their RAD obligations to residents.
What’s relevant to you?
If you’re interested in knowing which Budget announcements are relevant to you and your family, chat with the team at APS Financial Planning. We’re here to help you every step of the way!