Federal Budget Summary 2021
- The Stage 3 personal income tax cuts will proceed as originally planned, commencing on 1 July 2024. The tax rate above taxable income of $45,000 will drop from 32.5% to 30%, and the rate of 45% will apply above $200,000, eliminating the 37% tax bracket.
- The LMITO will be extended to 2021–22. Originally legislated for 4 years, the LMITO was then reduced to 2 years and due to end on 30 June 2021. The 12-month extension means it will end 30 June 2022. The rates and thresholds remain unchanged.
- The reduction in tax provided by LMITO will remain at $1,080 per annum ($2,160 for dual-income couples) with the base amount at $255 per annum for the 2020-21 income year.
- The $250 threshold for self-education expenses is to be removed.
- The work test will be removed completely. This measure is expected to take effect from 1 July 2022.
- The current minimum income threshold of $450 per month will be removed. The measure is expected to start from 1 July 2022. This means lower income earners, many of them women, will become entitled to superannuation guarantee support regardless of their level of income.
- The legislated Super Guarantee rate increase from 9.5% to 10% will apply for 2021-22.
- The age for making downsizer contributions (up to $300,000 of proceeds per member of a couple from selling the principal residence of at least 10 years) will be reduced from 65 to 60. This measure is expected to take effect from 1 July 2022. Downsizer contributions are not included in the NCC cap.
- The maximum amount of voluntary contributions that can be released under the First Home Super Saver Scheme will increase from $30,000 to $50,000. This measure is expected to take effect from 1 July 2022.
- The residency requirements for SMSFs and small APRA funds will be relaxed by extending the central management and control test safe harbour from 2 to 5 years for SMSFs; and removing the active member test for both fund types. This measure and is expected to take effect from 1 July 2022.
- The Government will not proceed with a measure to extend early release of superannuation to victims of family and domestic violence. The measure was previously announced on 21 November 2018.
- Individuals will be permitted to exit certain legacy retirement income stream products (excluding flexi-pensions or lifetime products in APRA-funds or public sector schemes), together with any associated reserves, for a 2-year period. Any commuted reserves will not be counted towards an individual's concessional contribution cap. Instead, they will be taxed as an assessable contribution for the fund.
- The Government has announced that they will be increasing the flexibility of the Pension Loans Scheme (PLS) by allowing participants to access up to two lump sum advances in any 12-month period up to a total value of 50% of the maximum annual rate of the aged pension.
- The total PLS is currently around $12,385 per year for singles and $18,670 couples (combined). The Government has also announced it will introduce a No Negative Equity Guarantee which means that when the house is sold, the Government will not claim back more than the sale price of the house used to guarantee the payment
- The new Family Home Guarantee will allow single parents with dependants to purchase a home with as little as a 2% deposit.
- The Government will invest a total of $17.7 billion on aged care reform over five years, including:
- $6.5 billion for 80,000 additional Home Care Packages over the next two years;
- $798.3 million for to provide greater access to respite care services and payments to support carers;
- $7.8 billion for a new funding model for residential aged care, with a $10 per person per day supplement of the Basic Daily Fee;
- $189.3 million over four years from 2020-21 to implement the new funding model, the Australian National Aged Care Classification (AN-ACC); and
- $117.3 million to support structural reforms, including the implementation of a new Refundable Accommodation Deposit (RAD) Support Loan Program.
- The Government will extend the 2020-21 temporary full expensing measures for 12 months until 30 June 2023. This will allow eligible businesses with 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.
- The loss years in respect of which an eligible company (aggregated annual turnover of up to $5 billion) can currently carry back a tax loss (2019-20, 2020-21 and 2021-22) will be extended to include the 2022-23 income year.
- The Administrative Appeals Tribunal (AAT) will be given the power to pause or modify ATO debt recovery action in relation to disputed debts of small businesses. This is expected to improve efficiency by keeping these matters out of the courts.
General Advice Warning
The information in this presentation contains general advice only, that is, advice which does not take into account your needs, objectives or financial situation. You need to consider the appropriateness of that general advice in light of your personal circumstances before acting on the advice. You should obtain and consider the Product Disclosure Statement for any product discussed before making a decision to acquire that product. You should obtain financial advice that addresses your specific needs and situation before making investment decisions. While every care has been taken in the preparation of this information, Infocus Securities Australia Pty Ltd (Infocus) does not guarantee the accuracy or completeness of the information. Infocus does not guarantee any particular outcome or future performance. Infocus is a registered tax (financial) adviser. Any tax advice in this presentation is incidental to the financial advice in it. Taxation information is based on our interpretation of the relevant laws as at 1 July 2020. You should seek specialist advice from a tax professional to confirm the impact of this advice on your overall tax position. Any case studies included are hypothetical, for illustration purposes only and are not based on actual returns.
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