2021 Federal Budget Takeaways

The Federal Government has recently unveiled its 2021-22 Federal Budget, being its second during the COVID-19 pandemic. Unlike the previous Budget, however, there were no major incentives introduced. Instead, several key incentives have been extended due to the high level of success achieved from their introduction.

Below we have outlined the relevant tax incentives, (both newly introduced and continued), for your reference.

Individuals:

Individual income tax rates remain unchanged. The Low and Middle Income-Earner Tax Offset (LMITO) has been extended to the end of the 2022 financial year. The benefit of the LMITO varies based on an individual’s taxable income, as summarised below:

Small Businesses:

While there were no significant measures introduced in the 2021-22 Federal Budget, the continuation of several key incentives are of importance to small businesses.

The extension of Temporary Full Expensing is an incentive for small business owners to purchase depreciating assets needed in their business operations. This extends the certainty of an immediate tax benefit resultant of the purchase of depreciating assets to 30 June 2023, without a limit on the cost of the asset able to be expensed (noting motor vehicles that are designed to carry less than one tonne & fewer than 9 passengers are still subject to the car limit of $59,136; this has not changed). The key requirements are summarised below:

Also extended was the Loss Carry Back incentive for an additional year. Under this incentive, companies can elect to ‘carry back’ tax losses from the 2021, 2022 and 2023 financial years to any of the 2019 to 2022 financial years. The losses carried back must not exceed earlier taxed profits and the company must have lodged tax returns for the loss year and the previous 5 years.

A newly introduced measure of importance is the removal of the $450/month threshold for superannuation guarantee contribution (SGC) eligibility. Previously, an employee must have earned $450 or more in a month to be eligible to receive SGC from their employer. From 1 July 2022, employers will be required to pay SGC from the first $1 earned by an employee in a relevant month, (unless another exemption applies, e.g. the employee being under 18 years of age). Increases to SGC rates are as planned; increasing from 9.5% to 10% from 1 July 2021, before increasing by 0.5% annually from 1 July 2022 to 1 July 2025, (ceasing at 12%).

For more detail on the above and the other non-tax related budget measures please see the Budget 2021-22 Fact Sheet.