The Federal Budget was released on the evening of Tuesday 11th of May, by Treasurer Josh Frydenberg. Please keep in mind the budget hasn’t been finalised till it passes through legislation and is subject to change.
Always seek advice from your financial advisor to be assured of how these changes apply to your situation.
We are highlighting the key points of the budget which affect Small Business, Individual Tax Payers, Employers as well as changes to Superannuation Contributions. Some of these don’t take effect until the 2022 year, and perhaps the upcoming Federal election might have something to do with this? All in all the Government is wanting to keep the economy bouncing along and the only big losers in this year’s budget are international tourism and the tertiary education sector. Given the fear of continued Covid outbreaks, the Federal government isn’t going to risk the gains we have made!
Individual Tax Payers
LMITO was due to end 30 June 2021. It has now been extended beyond this financial year. If you are a low to middle income earner, you can get a maximum of $1,080 of a tax offset.
This continues as per 2021 financial year:
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Max $1,080 for singles
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Max $2160 for couples
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Full $1080 between 48K and 90K
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Reduces under $45K and over 90K
Child Care Rebate Cap
Starts 1 July 2022.
Couples with >$180,390 combined income.
The threshold of $10,560 per child has been removed.
If you have 2 or more children in care, then you get a 95% rebate instead of a 65% which is massive.
Temporary Full Expensing Extended
The temporary full expensing of any new assets purchased as a business has been extended for another year, finishing on 30th June 2023.
If you buy new assets after 6th October 2020, you’ll be able to write off the full cost of that asset. For 2nd hand assets, the limit is still sitting at $150k but you must have ordered the asset by 31 December 2020 and have it installed or delivered by 30 June 2020.
If you’re planning on saving tax this financial year by purchasing a new work vehicle ready for delivery before 30th June in order to claim for full expensing.
However, if you are buying a vehicle such as a sedan, there is a car limit depreciation which limits the depreciation to $59, 136 in the 2021 financial year.
Company Loss Carry Back Extended
If you use a company structure and you’ve been profitable, you pay tax in the company. If you make a loss In a company structure, you can offset against previous year’s profits and get tax back.
Offset losses in 2021, 2022 & 2023 FY as far back as 2019 FY profits.
Unfortunately this does not apply to sole traders, partnerships or trusts.
EMPLOYERS AND SUPERANNUATION
SGC Increase to 10%
Superannuation Guarantee Charge (SGC) will increase from the current rate of 9.5% of ordinary time earnings to 10% from 1 July 2021. This means employers need to start preparing their payroll systems for this change to take effect from 1 July 2021.
In addition, the SGC changes have been legislated to increase by 0.5% at the start of each financial year reaching 12% by 1 July 2025.
$450 a month minimum earnings threshold scrapped
Hundreds of Australians holding casual or part-time jobs are set to be paid superannuation on their wages for the first time.
Removal of the $450 minimum threshold
About 300,000 part-time workers — mostly women — are set to gain from this budget measure.
Under the current superannuation arrangements, if a person earns less than $450 per month from the one employer, they are not entitled to receive the superannuation guarantee.
What do I have to do?:
As an employer you need to start preparing your payroll systems for this change to take effect from 1 July 2021. Budgeting and forecasting around employee costs need to factor in these changes.
Employees holding Student Visas.
Employees working in the industries and sectors listed below will be allowed to work increased hours beyond the current cap of 20 hours per week/40 hours per fortnight:
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Approved Aged Care Providers,
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Disability Services (NDIS approved),
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Agriculture
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Tourism
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Hospitality
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Students undertaking a health related course that supports efforts against Covid 19.
The Department of Home Affairs has stated that there is no end date to the relaxation of the working cap. It has been designed to aid in the recovery of industry in supporting services during the Covid 19 pandemic.
What do I have to do?:
If you have employees on student visas that work across the industries and sectors listed, you may consider offering them additional hours of work on a temporary or casual basis.
Ensure that any employees with student visas are aware of these temporary measures.
Work Test Removed
Previously, there was an age limit in which you can contribute your super into. The government has announced that they’re scrapping this rule that meant that if you were 67 years old or over, you couldn’t contribute into your super if you weren’t working a certain amount of hours a month.
From 1 July 2022, regardless of if you worked or not, you will now be able to make that contribution. This only applies to after tax – non-concessional contributions and salary sacrifice.
Downsizer Contributions
From 1 July 2022, you can sell your family home and downsize to a less expensive property and place the gain into your superfund up to $300k per person. This doesn’t count towards your contributions cap. You must have held the property for 10 years plus. This measure has been in place for some time, but the minimum age has been lowered from 65 to 60 years.
Is this going to appeal to some? We strongly suggest you speak to your financial advisor before making this move.
Some of the cons are:
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Downsizing your home may impact Age Pension eligibility. There is no special Centrelink means test exemption for making downsizer contributions
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The costs involved in selling a property and buying another one (if that’s also on the agenda) can be considerable, so you’ll need to take into account any additional property-related costs
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Downsizer contributions are not tax deductible.
Super Limits
The government has increased the limit of contributions to your superfund, taking effect as of 1 July 2021.
For concessional, each year, you will be able to contribute $27,500 into your superfund – an increase of $2,500. For non concessional, you will be able to contribute $110,000 – an increase of $10,000, after tax.
Other measures specifically targeted the following industries/sectors:
Farmers
The government will spend almost $60 million trialling ways to reduce emissions through livestock feed and soil management.
It’ll also waive almost $15 million of debt owed by more than 5,000 farmers receiving the Farm Household Allowance from Centrelink.
But those looking for an answer to the shortage of farm workers or a new international trade strategy to deal with the fallout from Australia’s deteriorating relationship with China may be disappointed.
Medical Startups
One of the new ideas in the budget is a new tax program aimed at encouraging medical and biotech companies to stay in Australia while they develop and then sell their ideas.
In a nutshell the “patent box tax regime” will tax any income from a company’s patent at a concessional rate of 17 per cent starting from July 1, 2022.
For comparison, large businesses are taxed at 30 per cent and small-to-medium enterprises at 25 per cent.
Start-ups are an area the government is focusing on this budget, with $500 million in other new measures to make Australia an attractive place for businesses.
Part of that includes removing red tape and changing tax rules to encourage the use of employee share schemes, which the government says are important for start-ups to attract and retain staff.
Small Brewers
Small brewers and distillers — the little guys of the industry — are getting some more help this year with $255 million in tax relief.
From July 1 this year anyone who is eligible will be handed back up to $350,000 worth of taxes.
That’s a big increase from the 60 per cent refund of taxes up to a $100,000 annual cap at the moment.
