The Budget sets out the next stage in the Government’s economic plan to get Australia through COVID-19.
The 2021-22 Federal Budget was tabled last night by the Treasurer, Josh Frydenberg. The Budget sets out the next stage in the Government’s economic plan to get Australia through COVID-19. It secures Australia’s recovery by creating jobs, guaranteeing essential services, and building a more secure and resilient Australia.
Please keep in mind that, as with any release on Federal Budget night, the measures outlined below are only proposals at this point. Further legislative review is required prior to any changes becoming law.
Some of the key economic points of the Federal Budget include:
- The deficit for 2020-21 is now expected to be $161.0 billion (down from the previously forecast $213.7 billion deficit, as estimated in the previous budget) fuelled by stronger than expected economic recovery.
- The projected budget deficit for 2021-22 is $106.6 billion (5.0% of GDP).
- The low and middle income tax offset (LMITO) will be extended for the 2021-22 financial year. The LMITO provides a reduction in tax of up to $1,080 for eligible individuals, to be received as a tax offset in their tax return. An estimate of the resulting tax savings from the LMITO extension is as follows:
- The Government reiterated it will not bring forward the previously announced ‘Stage 3’ marginal tax rate cuts. These will remain on the original 2024-25 time frame and will not be fast-tracked at this stage.
The below superannuation changes are likely to begin from 1 July 2022:
- The $450 a month threshold for employers to pay compulsory Superannuation Guarantee (SG) contributions will be removed, meaning SG will be payable on any dollar an employee earns.
- Repealing the work test requirement for individuals aged between 67 and 74 (inclusive), allowing them to make or receive non-concessional (including under the bring-forward rule where eligible) or salary sacrifice superannuation contributions without meeting this test. Importantly however, individuals aged 67 to 74 will still have to meet the work test to make personal deductible contributions. The work test requires an individual to work at least 40 hours over a 30 day period in the relevant financial year.
- The age to be able to make downsizer contributions following the sale of your home has been widened to those aged over 60 (an improvement from the current eligibility age of 65). The downsizer contribution allows individuals to make a one-off superannuation contribution of up to $300,000 per person from the proceeds of selling their home they have owned for 10 years or more.
- Significant reforms to the childcare system will reduce fees for working families with two or more children. This is scheduled to take effect from 1 July 2022 and will involve an increase in the childcare subsidy to a maximum of 95% for the second child and subsequent children in care. The $10,560 annual childcare subsidy cap for high-income earners will also be abolished.
- Establishment of the Family Home Guarantee with 10,000 places from 2021-22 to support single parents with dependants to enter, or re-enter, the housing market with a deposit of as little as 2 per cent.
- Extension of the First Home Loan Deposit Scheme to provide an additional 10,000 New Home Guarantees in 2021-22 to allow eligible first home buyers to build a new home or purchase a newly constructed home sooner with a deposit of as little as 5 per cent.
- The Government will increase the maximum releasable amount of voluntary concessional and non-concessional contributions under the First Home Super Saver Scheme (FHSSS) from $30,000 to $50,000 with a likely start date of 1 July 2022.
- The Government will provide an additional $17.7 billion to improve the quality and safety of aged care services, as recommended in the Royal Commission into Aged Care.
- Businesses with a turnover of less than $5 billion can deduct the full cost of eligible new capital assets for an additional year until 30 June 2023
- Corporate tax entities with a turnover of less than $5 billion can also continue to apply tax losses against tax paid in previous years. This extends the time a business can obtain a refundable tax offset for a further year until 30 June 2023.
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