On Tuesday 11 May 2021, Treasurer Josh Frydenberg handed down the 2021-22 Federal Budget. As expected, the budget is a balancing act that details how the Government intends to continue to support COVID-19 recovery while focusing on the more long-term goal of budget repair. Read on for a quick rundown of the items in the budget that may affect you, for better or for worse.
Federal budget snapshot
- Tax cuts
The first question on everyone's lips at the announcement of a new federal budget - will there be tax cuts? The good news is yes, tax cuts are coming, and they will be backdated.
The government is bringing forward stage 2 of its legislated tax cuts, which will see the 19 per cent threshold rise from $37,000 to $45,000, and the 32.5 per cent threshold increased from $90,000 to $120,000.
And there’s some relief for low- and middle-income earners too, because, as predicted, the Low- and Middle-Income Tax Offset (LMITO) will be continued for another year, meaning eligible individuals will get $1,080 and dual income couples can receive up to $2,160.
So, with the offset combined with the tax cuts, this means singles could get back up to $2,745, and dual income families could get back up to $5,490.
2. Business owners
Businesses with an aggregated turnover of less than $5 billion will be able to write off the full value of any eligible assets that you buy for your business.
What does this mean for you? If your business needs new equipment or you've been considering upgrading what you already have, it's worth making those purchases before tax time.
There are some exclusions to this, such as improvements to land or buildings that aren't considered plant or as separate depreciating assets in their own right. But generally, assets acquired from 6 October 2020 and first used or installed ready for use by 30 June 2023 are eligible for the full write off.
As introduced in the 2020-21 budget, losses incurred to June 2022 will also be able to be offset against prior profits made going back to the 2018-19 financial year.
Businesses will also be encouraged to hold onto employees who are facing redundancy or redeployment by providing a Fringe Benefits Tax (FBT) exemption on retraining and reskilling. This exemption applies from 2 October 2020
3. Home ownership
There’s also good news for first homebuyer as the Government is expanding its First Home Loan Deposit Scheme by another 10,000 places. This means that if you're an eligible first home buyer you will be able to borrow with a deposit as low as 5 per cent, and you'll also be able to avoid lender's mortgage insurance.
In addition, the Government is guaranteeing 10,000 places under the Family Home Guarantee, which means that if you're a single parent with dependants you may be able to access a home loan with a deposit of only 2 per cent.
Speaking of superannuation, the government is making a major change to how super funds work, saying a new account will no longer be automatically created every time someone changes jobs. Instead, Australians will automatically keep their super fund when they change employers. This will help simplify the process of selecting a superannuation product and potentially reduce duplicate fees and insurance.
The ATO will introduce an online comparison tool known as ‘YourSuper’ with the goal of enabling new employees to select a superannuation product from a table of super funds ranked by fees and performance. This tool will also allow employees to easily consolidate super accounts if they have more than one.
5. Retirement plans and aged care
Demand for home care packages for the elderly has been high, even more so due to COVID-19. and the Government will provide an extra 23,000 places at a cost of $1.6 billion, bringing the total to 180,000 places.
The Government also says 99 per cent of all those wanting in-home aged care will now have access to some form of support, with a required amount of care to be provided per day by carers and registered nurses. Funding will also be provided to improve skills in the aged care workforce and provide extra dementia training and support.
And turning back to superannuation for a moment, the work test requirements for individuals aged 67 to 74 will no longer have to be met when making after tax or salary sacrificed super contributions.
$2 billion is set to be delivered toward early education, allowing universal free access to preschools around the country. Children will receive access at least 15 hours a week, beginning from mid-2022.
There is no specific funding for universities in the budget, despite the ongoing struggles universities are suffering as a result of being unable to allow international student enrolments due to COVID-19.
However, $26.1 million over four years from 2021-22 will be assigned to assist non-university higher education providers to attract more domestic students through offering 5,000 additional short course places in 2021, and a further $9.4 million to provide grants to eligible higher education and English language providers to support innovative education delivery models both offshore and online.
Australian schools will also receive an increase in funding from $13.8 billion in 2014 to $23.4 billion in 2021.
The Government will provide an extra 100,000 new apprenticeships and traineeships, and under The Boosting Apprenticeship Commencements wages subsidy program businesses will be offered a 50 per cent wage subsidy for each apprentice they hire.
Further help to understand how the budget affects you
Profacc Accountants are ready to help you make sense of what the Federal Budget means for you personally or for your business. Speak to our team of experienced accountants