The Treasurer has delivered a second “pandemic” budget that focuses on key spending measures to drive Australia’s economic recovery.
This budget’s focus is firmly on getting Australia through the pandemic and promoting economic growth and employment. Recent remarks from the Treasurer have made clear that there are still downside risks to the economy and he expects the Government to continue providing a significant amount of support. The budget does this through new spending on priorities like aged care, childcare, and building the digital economy, as well as tax relief for businesses and low income earners.
BUSINESS SUPPORT
Temporary Full Expensing Extension
The Government will extend the 2020-21 budget measure for an additional 12 months until 30 June 2023, which allows all businesses with aggregate turnover or total income of less than $5 billion to fully expense depreciable assets in the current tax year.
Temporary Loss Carry-back Extension
The Government will also extend the 2020-21 budget measure which allows companies to claim back tax paid in prior financial years back to 2018-19 where a tax loss occurs until the end of the 2022-23 financial year.
PERSONAL INCOME TAX
Personal income tax rates remain unchanged from those announced in the 2020-21 Budget, which brought forward the second stage of the Government’s Personal Income Tax Plan by two years to 1 July 2020. Stage three of the Plan is unchanged and scheduled to commence in 2024-25.
Low and Middle Income Tax Offset
The Government will extend the Low and Middle Income Tax Offset by one year, making it available for the 2021-22 financial year. This measure provides a reduction in tax of up to $1,080 to low and middle income earners.
Medicare Levy
The Government will again increase the Medicare levy low-income threshold to account for recent movements in the consumer price index.
Employee Share Schemes (ESS)
Removing employment cessation as a taxing point of deferred schemes. Currently under a qualifying tax deferred ESS the taxing point is the earliest of:
• When the employee ceases employment with the employer,
• When there is no risk of forfeiture or restrictions on disposal of the shares, or
• When the employee exercises options and there is no risk of forfeiture or restrictions on disposal of the resulting shares, and
• A maximum deferral period of 15 years.
The proposed change will remove cessation of employment as a deferred taxing point.
The purpose of this amendment is to remove the possibility that a tax liability may arise at a point in time before the employee actually has access to the shares under the terms of the ESS.
SUPERANNUATION
Downsizer Contributions
The Government will reduce the eligibility age to make a downsizer contribution from 65 to 60 from 1 July 2022. The scheme allows a one-off, post tax contribution of $300,000 per person from selling a house with contributions not counted towards the non-concessional cap.
Removing The Work Test
The Government will allow individuals aged 67 to 74 years (inclusive) to make or receive nonconcessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution caps. Individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions.
Super Guarantee Threshold
The Government will remove the $450 per month minimum income threshold under which employees do not have to be paid the superannuation guarantee from 1 July 2022. The measure is expected to boost the superannuation savings of lower income Australians, 63 per cent of whom are women.
First Home Super Saver Scheme
The Government will increase the maximum amount of voluntary concessional and non-concessional contributions releasable from FHSSS accounts from $30,000 to $50,000 from 1 July 2022. This means all voluntary contributions made from 1 July 2017 up to the existing limit of $15,000 per year will count towards the total amount able to be released. The Government has also announced some minor amendments to the administration of the FHSSS to provide additional flexibility to the recipient and the ATO to make amendments to their application and withdrawal amount allowing an increase or decrease of the applied amount prior to a payment being made with no penalty to the recipient.
Superannuation Thresholds From 1 July 2021 To 30 June 2022
CHILD CARE
The Government announced it will:
Increase the Child Care Subsidy (CCS) rate by 30 percentage points for the second child and subsequent children aged five years and under in care, up to a maximum CCS rate of 95% for these children, commencing on 1 July 2022, and
Remove the CCS annual cap of $10,560 per child per year commencing on 1 July 2022. This will provide greater choice to parents who want to work an extra day or two a week.
Removing the annual cap helps support the choices of parents to work the hours they want to work and, in particular, reduces barriers that secondary income earners face when seeking to work more. The current hourly fee caps will continue to apply.
SOCIAL SECURITY PENSION LOAN SCHEME
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 per cent of the maximum annual rate of the aged pension. Based on current Age Pension rates, the total PLS is around $12,385 per year for singles, while couples combined could receive around $18,670. The Government will also introduce a No Negative Equity Guarantee meaning that the Government will not claim back more than the sale price of the house. To raise awareness of the Pension Loan Scheme, the Government will also spend $21 million on advertising and raising awareness of the scheme.
AGED CARE
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)
$117.3 million to support structural reforms, including the implementation of a new Refundable Accommodation Deposit (RAD) Support Loan Program.
We trust this information is a useful resource for you and your business. If you have any questions about the Budget, please email info@vatcpa.com.au or call on (03) 9584 2277.
It is important to note that some of the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change or further refinement.
Any advice in this Federal Budget Analysis has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs.