The Federal Budget handed down this week is all about securing Australia’s recovery. As expected there is a strong emphasis on job growth and women’s security. The deficit forecast for 2021-22 is $106.6b but reducing to $57b by 2024-25, and net debt is expected to increase to 50% of GDP over the same period. However the Government is confident that the economy is in a strong position to stabilise and reduce debt over time.
This newsletter provides a summary of the key changes relating to tax and superannuation…
Personal Income Tax Measures
Continuation of the Low and Middle Income Tax Offset (“LMITO”)
The Government announced that it will retain the LMITO for the 2022 income year (originally due to end in the 2021 income year).
The LMITO is a non-refundable tax offset targeted at low to middle income taxpayers and is payable in addition to the normal Low Income Tax Offset. To recap, the details of both offsets are as follows:
Low Income Tax Offset
- Taxable income less than $37,500 – you will receive the full offset of $700
- Taxable income between $37,501 and $45,000 – you will receive $700 less 5% of the excess over $37,500
- Taxable income between $45,001 and $66,667 – you will receive $325 less 1.5% of the excess over $45,000
Low and Middle Income Tax Offset
- Taxable income less than $37,000 – you will receive $255
- Taxable income between $37,001 and $48,000 – you will receive $255 plus 7.5% of the excess over $37,000
- Taxable income between $48,001 and $90,000 – you will receive $1,080
- Taxable income between $90,001 and $126,000 – you will receive $1,080 less 3% of the excess over $90,000
Business Tax Measures
Extension of temporary full write-off of capital assets
In last year’s Federal Budget, the Government announced that businesses with an aggregated annual turnover of less than $5 billion would be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed. In this year’s Budget, this has been extended to 30 June 2023. The requirements that must be met are:
- The asset was acquired from 7:30pm AEDT on 6 October 2020
- The asset was first used or installed ready for use by 30 June 2023
Extension of temporary loss carry back for eligible Companies
In last year’s Federal Budget, the Government announced a temporary loss carry-back measure that allowed companies with an aggregated annual turnover of less than $5 billion to carry back losses from the 2020, 2021 or 2022 income years to offset previously taxed profits made in or after the 2019 income year.
Superannuation
In this year’s Federal Budget there were several welcome key measures relating to superannuation and SMSFs. These changes are expected to commence from 1 July 2022 once they have received Royal Assent.
Removal of the work test for voluntary contributions on or after age 67
Individuals aged between 67 and 74 (inclusive) will be able to make non-concessional contributions without meeting the existing work test. In addition they will also be able to access the 3 year bring forward arrangement. However the work test will still apply for concessional personal deductible contributions (to satisfy the work test you must be working for at least 40 hours in a 30 consecutive day period). Contributions are still subject to existing contribution caps and total superannuation balance limits.
Reducing the eligibility age for downsizer contributions
The eligibility age to make downsizer contributions will be reduced from 65 to 60 years of age. All other eligibility criteria remains unchanged, allowing individuals and couples to make a one-off, after tax contribution into their superannuation fund of up to $300,000 per person from the proceeds of selling their home. These contributions will not count towards the non-concessional contribution caps.
Removing the $450 per month threshold for super guarantee eligibility
The Government will remove the current $450 per month minimum income threshold under which employees do not have to be paid the super guarantee by their employer. This will allow more low income workers to qualify for superannuation.
Relaxing residency requirements for SMSFs
SMSFs will have relaxed residency rules through the extension of the central management and control test from 2 years to 5 years. The active member test will also be removed allowing members who are temporarily absent to continue to contribute to their SMSF.
Increasing the amount that can be withdrawn under the First Home Super Saver Scheme (FHSSS)
The Government will increase the maximum releasable amount of voluntary concessional and non-concessional contributions from $30,000 to $50,000 to assist first home buyers in raising a deposit more quickly. Voluntary contributions made from 1 July 2017 up to the existing limit of $15,000 per annum will count towards the total amount able to be released.
KEY DATES
| 17 MAY | General due date for SMSFs, companies and other entities not required to lodge earlier |
| 26 MAY | Lodge and pay March quarterly BAS through a Tax Agent |
| 5 JUNE | Extended due date for SMSFs and companies where non-taxable in the prior and current year
Extended due date for individuals and trusts with a due date of 17th May |
| 30 JUNE | Last day to deposit contributions into your super fund for allocation / deductibility in 2021
Last day to withdraw your pension from your super fund and have it count towards your minimum requirement in 2021 |
LOOK OUT FOR OUR END OF FINANCIAL YEAR TAX AND SUPER CHECKLIST IN OUR NEXT NEWSLETTER!!