On Tuesday 11th May 2021 the Federal Government announced its annual Budget for 2021/22. Both
individuals and businesses will be affected by the changes announced. In this article TSP have summarised the key points affecting both Individuals, Businesses and Superannuation.
Individuals
Low and Middle Income Tax Offset (LMITO)
The LMITO was only available until 30 June 2021.
This year’s Budget has extended it for another year to 30 June 2022.
The LMITO forms part of your tax refund and is calculated as follows:
| Taxable Income | Offset Available |
| $37,000 or less | Up to $255 |
| $37,001 to $48,000 | $255 + ((taxable income – $37,000) x 7.5% ) |
| $48,001 to $90,000 | $1,080 |
| $90,001 to $126,000 | $1,080 – ((taxable income – $90,000) x 3%) |
| $126,000 + | Nil |
Medicare Levy Low Income Thresholds
The thresholds will increase for the 2021 year. The table below indicates the previous and new 2021 thresholds.
| Family Situation | Previous threshold | 2021 threshold |
| Single | $22,801 | $23,226 |
| Family | $38,474 | $39,167 |
| Senior – Single | $36,056 | $36,075 |
| Senior – Couple | $50,191 | $51,094 |
Note the family threshold will increase by $3,597 for each dependent child (previously $3,533).
Changes to Residency Rules
The rules to determine whether an individual is a resident of Australia for tax purposes have always
been complex. The Government announced changes to the current rules with effect from the first
income year after the date of Royal Assent of the legislation.
The changes are:
- A primary test – if a person is physically present in Australia for 183 days or more they will be an Australian tax resident
- If the primary test is not passed then secondary tests will be availble.
Self-education Costs
The $250 non-deductible threshold will be removed so that the first dollar of self education costs will
be tax deductible. This will apply to the first income year after the date of Royal Assent of the
legislation.
BUSINESSES
Temporary Full Expensing (formerly Instant Asset Write Off)
The Temporary Full Expensing rules have been extended from 30 June 2022 to 30 June 2023.
All businesses with an aggregated turnover of less than $5 billion will be able to deduct the full cost
of eligible depreciable assets under the $150,000 threshold.
Temporary Loss Carry-Back Extension
The Government has extended this rule from 30 June 2022 to 30 June 2023. Eligible businesses (with
an aggregated turnover of less than $5 billion) can offset tax losses made in the 2020 year through to
2023 financial years to claim a refund of tax paid as far back as the 2019 financial year.
SUPERANNUATION
The announcement of the Federal Budget 2021/22 also included changes to superannuation.
Superannuation Guarantee $450 per month threshold to be removed
Previously, employers were not required to contribute superannuation guarantee if an employees’
wages were less than $450 per month. The Government has announced the removal of this rule
effective the first financial year following Royal Assent of the legislation. It is expected this will be
from 1 July 2022.
Removal of the Work Test
The Government announced the removal of the requirement to meet the work test, for those aged
67 to 74 years, when making non-concessional (after tax) and salary sacrifice superannuation
contributions.
The work test still needs to be met for those aged 67 to 74 years who wish to make personal
deductible contributions.
An individual passes the work test if they work for 40 hours or more in a 30 consecutive period during
the financial year in which the superannuation contribution is made.
These changes are expected to be in effect from 1 July 2022.
Age Limit Reduced for Downsizer Contributions
The downsizer contribution allows individuals to make an after tax contribution up to $300,000 to
their superannuation fund following the disposal of an eligible dwelling. Previously this contribution
was only available to those aged 65 and over.
The Government will reduce the age limit from 65 to 60 years of age.
First Home Super Saver Scheme
The Government will increase the maximum amount to be released under the Scheme from $30,000
to $50,000. This is likely to be in effect from 1 July 2022.
If you have further questions relating to any of the above items or would like any assistance please give the TSP team a call on 4926 4155 or email us admin@tspaccountants.com.au