Budget 2021/22

13/5/2021

2021-22 Federal Budget Unpacked

On Tuesday night, the Federal Government handed down the Budget for the 2021/22 financial year. As the Covid economic landscape continues to develop, the Government's Budget covers a range of measures, including superannuation, tax, social security, and help for first home buyers to help stimulate the economy and get us all spending again.

I have been through the Budget (so you don't have to), and here is a broad summary of the proposed changes that the Government has put forward. Please remember that these are just proposed changes now and have not been legislated, so there could be changes.

Summary

Superannuation

Repealing the work test: If you are 67-74 to make superannuation contributions, you are currently required to satisfy a work test. The Government is proposing to remove this requirement which means that you no longer need to be working to make non-concessional contributions, or if you are working minimal hours, you will be able to make salary sacrificed (concessional) contributions. This will also give you access to the bring-forward rule as well.
Reduction of the eligibility age for downsizer contributions: The Government has proposed to reduce the downsizer eligibility age from 65 to 60. This downsizing contribution allows a person who has sold their family home to make a personal contribution (after-tax) of up to $300,000.
Removing the minimum income threshold for super guarantee: The minimum income threshold will be removed so that all eligible employees will receive superannuation guarantee contributions rather than earn a minimum of $450 per month before they qualify.
Increasing the First Home Super Saver Scheme (FHSSS) maximum releasable amount to $50,000: Currently, the FHSSS gives eligible applicants the ability to access up to $30,000 of their voluntary contributions in their superannuation account. The Government has not announced changes to the maximum voluntary contributions limit, which is currently sitting at $15,000 per annum for the scheme. This would mean making the maximum voluntary contributions for a first home buyer for a minimum of 4 years to take full advantage of the proposal.
Complying pension and annuity conversions: Under the Government's proposal, people with certain complying income stream products will be given a 2-year window to transition to newer, more flexible products. Retires will be able to transfer their capital back to a superannuation account, then commence a new retirement product, take out a lump sum or retain the benefits in that account.
Relaxation of the residency requirements for SMSF's and Small Apra Funds: Under the Budget, the Government plans to relax the residency requirements for SMSFs by extending the central management and control test from 2 to 5 years and removing the active member test. Removing the active member test allows members and trustee's who are temporarily overseas to continue to make contributions to their SMSF.

Taxation

Extending the Low and Middle Income Tax Offset (LMITO): Currently due to end on 30 June 2021 the LMITO will now be retained for one more year and end in 30 June 2022. This can be worth up to $1,080 for individuals and $2,160 for couples. The table below shows the benefit in the different income brackets.

2021-22 Taxable income	Low and Middle Income Tax Offset
$37,000 or less	$255
Between $37,001 and $48,000	$255 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,080
Between $48,001 and $90,000	$1,080
Between $90,001 and $126,000	$1,080 minus 3 cents for every dollar of the amount above $90,000

Increasing the Medicare levy low-income thresholds: The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from the 2020-21 income year. The following table compares the level of taxable income below which no Medicare Levy is payable.

Income category	2019-20	2020-21
Taxpayers entitled to seniors and pensions tax offset (SAPTO)
Individual	$36,056
Married or sole parent	$50,191
For each dependant child or student, add:	$3,533
All other taxpayers
Individual	$22,801	$23,226
Couple / sole parent (family income)	$38,747	$39,167

Temporary full expensing: The temporary investment tax incentive announced in last year's Budget has been extended for a further 12 months until 30 June 2023, giving businesses additional time to utilise the incentive and including for projects requiring longer planning times. Businesses with a turnover of up to $5 billion will be able to deduct the total cost of any eligible asset they purchase for their business, including the cost of improvements to existing assets, until 30 June 2023.
Temporary loss carry-back provision: Companies will now be permitted to carry-back tax losses for an extra 12 months from the 2019/20, 2020/21, 2021/22, and now 2022/23 income years to offset previously taxed profits in 2018/19 or later income years. This too applies to businesses with an aggregated turnover of less than $5 billion.

Home Ownership

Family Home Guarantee for single parents: The Government has introduced the Family Home Guarantee to provide a homeownership pathway to support single parents with dependents. This is regardless of whether they are a first home buyer or a previous owner-occupier. From 1 July 2021, 10,000 guarantees will be made available over four years to eligible single parents with a deposit of as little as 2%, subject to an individual's ability to service a loan.
New Home Guarantee: The Government is providing a further 10,000 places under the New Home Guarantee in 2021/22. This is specifically for first home buyers seeking to build a new home or purchase a newly built home with a deposit of as little as 5%.
Home Builder: the Government will give people more time to take advantage of the grants by extending the construction commencement requirement from 6 to 18 months.

Child care

Increasing the Child Care Subsidy (CCS): The Government will announce that it will increase the CCS rate by 30 percentage points for the second child and subsequent children aged five and under in care. This will be up to a maximum rate of 95% for these children and due to commence on 11 July 2022. The Government is also proposing to remove the CCS annual cap of $10,560 per child per year commencing 1 July of next year.

Aged care

Response to the Royal Commission: The Government has pledged $17.7 billion to aged care over the next five years with a focus on improving the sector. This will include the Government funding an additional 80,000 Home Care packages from now until 2023 and increasing the funding for residential aged care over three phases from now until 2025.

Important information and disclaimer
Sources:
Budget 2021–22 Budget Overview, Based on Commonwealth of Australia data, https://budget.gov.au/2021- 22/content/download/glossy_overview.pdf., 11 May 2021.
Budget 2021-22, Based on Commonwealth of Australia data, https://budget.gov.au/2021-22/content/essentials.htm#eight, 11 May 2021

Any advice provided in this communication is of a general nature only. It may not be suitable for you as it does not take into account your personal objectives, financial situation or needs. Please seek personal advice before making a decision about a financial product or acting on any advice in this communication. Any tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law. We recommend you consult with a registered tax agent. Reliance should not be placed by anyone on this document as the basis for making any investment, financial or other decision.

Information in this communication is current as at 13 May 2021 and may be subject to change. Opinions constitute our judgement at the time of issue. In some cases information has been provided to us by third parties. While the information in this communication is believed to be accurate and reliable, its accuracy is not guaranteed in any way.

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2021-22 Federal Budget Unpacked

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