2021 Federal Budget summary- How it may impact you?
The Federal Treasurer, the Hon. Josh Frydenberg MP, delivered his second Federal Budget on 11 May 2021. This budget’s focus is firmly on getting Australia through the pandemic and promoting economic growth and employment.
The spending plans are huge, with debt peaking at $980bn, 41% of GDP. As a result, economic growth is forecast to jump to 4.2% in 2021/22, with an expectation of bringing unemployment down towards 4.5%, a level not seen since before the GFC.
Unsurprisingly after the Royal Commission’s report, Age care was a major beneficiary. Other big winners were business (more tax write offs), childcare and support for women, NDIS funding, training and infrastructure.
Highlights of the Budget that could impact you include:
1. Tax Rates–
The Low and Middle Income Tax Offset (LMITO), which was due to end on 30 June 2021 will now be retained for one more year (2021-2022). It is worth up to $1,080 for individuals and $2,160 for couples.
The benefit for those earning between $48,000 and $90,000 is the maximum LMITO benefit ($1,080). For income above $90,000, the offset phases out at a rate of 3cents per $1 and is not available when taxable income exceeds $126,000.
Source- AMP
2. The Medicare levy rate
With only a few weeks left, the income thresholds at which the Medicare levy is payable will be increased for FY21.
The threshold for:
Singles, will be increased from $22,801 to $23,226.
Families, from $38,474 to $39,167.
Single seniors and pensioners, from $36,056 to $36,705; and
Families (seniors and pensioners) will increase from $50,191 to $51,094.
For each dependent child or student, the family income thresholds increase by a further $3,597 instead of the previous $3,533.
3. Easier Superannuation access for older Australians.
Removing the work-test
From July 2022, individuals aged 67-74 (inclusive) will be allowed to make or receive non-concessional superannuation contributions or salary sacrifice contributions without meeting the work-test^, subject to existing contribution caps. Eligible individuals will also be able to access the $300,000 non-concessional “bring-forward” rule, subject to meeting eligibility criteria.
The work-test will still need to be met by individuals aged 67-74yrs wanting to make personal deductible contributions.
Downsizer contributions
From 1 July 2022, it is proposed that individuals aged 60 and older will be able to make downsizer contributions.
Currently the legislation allows individuals 65 and older to utilise the contribution rule.
All other eligibility criteria for the downsizer contributions remains unchanged.
The outline of eligibility criteria can be found in our article here.
4. First Home Super Saver and Family Home Guarantee
First Home Super Saver
From 1 July 2022, the Government has proposed an increase to the withdrawal cap of voluntary contributions from $30,000 to $50,000 (each if a couple). Voluntary contributions to a cap of $15,000 pa made from 1 July 2018 will count towards the total amount able to be released (to a maximum of $50,000). Please note to qualify you must meet the eligibility criteria. Read more details here.
Family Home Guarantee
The Government announced an extension to the First Home Loan Deposit Scheme (FHLDS) establishing a new program to provide eligible single parents with dependants the opportunity to build or buy a home with a 2% deposit (subject to eligibility criteria).
5. Extension to instant asset write-off and Loss Carry-back extension –
The ‘temporary’ (not so temporary) ability to fully expense depreciable assets has been extended until 30 June 2023. It allows eligible businesses with an aggregated annual turnover less than $5bn to deduct the full cost of eligible depreciable assets of any value acquired from 7:30pm 6 October 2020 and first used or installed ready for use by 30 June 2023.
Loss Carry-back
Eligible companies with a turnover of less than $5bn will be eligible to carry back tax losses from the 2022-2023 income year to offset previously taxed profits as far back as the 2018-19 income year.
6. Aged Care –
Proposed to take effect immediately, in response to the recent Royal Commission into Aged Care Safety and Quality, the Government has proposed delivering $17.7bn to Aged Care over 5 years. Two immediate issues-
release of 80,000 new home care packages over two years from FY22; and
subsidising (contributing) $10/ day / resident of the basic daily care fee.
Please note that these proposals require passage of legislation before they are implemented. We will continue to monitor these proposals and provide further communications as more details emerge.
^To satisfy the work test, you must work at least 40 hours during a consecutive 30-day period each financial year in which the contributions are made.
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