Budget 2021/2022

Bright natural dining room nook with vases plates and fruits on the table.

With a few minor exceptions, budget 2021/2022 was pretty much a matter of extending programs that were already in place to stimulate the economy in the wake of the Covid-19 pandemic. At the time of writing this the legislation enacting the budget proposals had not been passed by Parliament. Most of what was announced is not set to start until 1 July 2022. We will provide further updates and reminders once the legislation has been passed.

Here’s a summary of the key budget highlights:

Full expensing of depreciable assets

Temporary full expensing of depreciable assets has been extended for a further year to June 2023. There are exclusions, the most notable being buildings and other capital works.

Loss carry back extended to 2023

Loss carry back provides a refundable tax offset that eligible companies can claim against prior years income tax liabilities for the 2018-19, 2019-20, 2020-21 , 2021-22. The tax offset can be claimed in the 2020-21, 2021-22 or 2022-23 company tax return.

To receive the offset the company must have had an income tax liability for the 2018-19, 2020-21, 2020-21 or 2021-22 years and is limited to the balance of its franking account.

$450 per month minimum removed for superannuation guarantee

The government is removing the $450 per month Ordinary Time Earnings threshold for the superannuation guarantee. This is to take effect from 1 July 2022

Apprenticeship wage subsidy expanded

The Boosting Apprenticeship Commencements wage subsidy will be expanded to support businesses and Group Training Organisations that take on new apprentices and trainees. This measure will uncap the number of eligible places (currently capped at 100,000 places). The duration of the 50% wage subsidy will be increased to 12 months from the date an apprentice or trainee commences with their employer. The subsidy will now be available from 5 October 2020 to 31 March 2022 and businesses of any size can claim the wage subsidy for new apprentices or trainees who commence during this period. Eligible businesses will be reimbursed up to 50% of an apprentice or trainee's wages of up to $7,000 per quarter for 12 months.

Patent box with 17% tax rate for new patents

A patent box is being introduced to encourage medical and biotech businesses to undertake their R&D in Australia and keep patents here. The patent box will tax income derived from Australian medical and biotech patents at a 17% effective concessional corporate tax rate. This is to start from 1 July 2022.

Cessation of employment removed as tax point for Employee Share Schemes

To support Australian companies to attract and retain talent, the government is removing the cessation of employment taxing point for tax-deferred Employee Share Schemes (ESS) that are available for all companies.

New bright-line test for individual tax residency

The government will replace the individual tax residency rules with a new, easier to understand framework that provides certainty and reduces compliance costs for globally mobile individuals and their employers. The primary test will be a simple ‘bright line’ test: a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident. This is to come into effect from 1 July 2022.

‘Downsizer contribution’ opportunity expanded

People over 60 (currently 65 or older) will be able to contribute up to $300,000 into super if they downsize their home. This is likely to come into effect from 1 July 2022.

Work Test

From 1 July 2022, individuals aged 67 to 74 will no longer be required to meet the work test when making, or receiving, non-concessional superannuation contributions (non-deductible contribution made from after tax money) or salary sacrificed contributions. These individuals will also be able to access the non-concessional bring forward arrangement, subject to meeting the relevant eligibility criteria.

Access to concessional personal deductible contributions for individuals aged 67 to 74 will still be subject to meeting the work test.

Low- and middle-income tax offset extended to 2022

The low- and middle-income tax offset (LMITO) is extended for a further year to June 2022. The offset is worth up to $1,080 for individuals or $2,160 for dual income couples.

$250 exclusion on self-education deductions to be removed

The current limitation for individuals claiming self-education expenses, where the first $250 of the deduction is denied, will be removed. The removal of the $250 exclusion for prescribed courses of education will make it easier for individuals to work out their allowable deductions in the years they incur these expenses. This is to be effective from 1 July 2022.

If you are keen to learn what is new from 1 July 2021 you might like to read our blog What's new from 1 July 2021?

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Disclaimer: This is general information only and is not advice of any sort. No warranty or representation is provided by Accounting Heart Pty Ltd as to the accuracy, currency or completeness of the information contained in this blog. Readers of this blog should not act or refrain from acting in reliance upon any information contained herein and must always obtain appropriate taxation and / or other advice as may be appropriate having regard to their particular circumstances.

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