Budget 2021 Updates
- Next years personal income tax rates had already been announced, they are:
We can look forward to more personal income tax cuts in 2025
- LMITO retained for 2021-22 – the Government will retain the low and middle income tax offset for the 2021-22 income
year. The LMITO provides a reduction in tax of up to $1,080.
- Temporary full expensing extended – the Government will extend the 2020-21 temporary full expensing measures for 12
months until 30 June 2023. This will allow eligible businesses with aggregated annual turnover or total income of less than
$5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30pm AEDT on
6 October 2020 and first used or installed ready for use by 30 June 2023.
- Loss carry-back extended – the loss years in respect of which an eligible company (aggregated annual turnover of up to
$5 billion) can currently carry back a tax loss (2019-20, 2020-21 and 2021-22) will be extended to include the 2022-23
- Individual residency test reformed – the Government will replace the existing tests for the tax residency of individuals
with a primary “bright line” test under which a person who is physically present in Australia for 183 days or more in any
income year will be an Australian tax resident.
- Employee share schemes – the Government will remove the cessation of employment as a taxing point for the taxdeferred employee share schemes.
- ATO debt recovery – the AAT will be given the power to pause or modify ATO debt recovery action in relation to disputed
debts of small businesses.
- Self-education expenses – $250 threshold to be removed.
Superannuation and related measures
The key superannuation and related measures announced in the Budget include:
▪ Superannuation contributions work test – to be repealed from 1 July 2022 for voluntary non-concessional and salary
sacrificed contributions for those under age 75. However, the work test will still apply for personal deductible contributions
by those aged 67-74.
▪ SMSF residency rules – to be relaxed by extending the central management and control test safe harbour from 2 to 5
years and removing the active member test for both SMSFs and small APRA funds.
▪ Conversions of legacy income streams – individuals will be permitted to exit certain legacy retirement income stream
products (excluding flexi-pensions or lifetime products in APRA-funds or public sector schemes), together with any
associated reserves, for a 2-year period. Any commuted reserves will not be counted towards an individual’s concessional
contribution cap. Instead, they will be taxed as an assessable contribution for the fund.
▪ Super Guarantee $450 per month threshold – to be removed from 1 July 2022.
▪ Downsizer contributions – eligibility age to be lowered from 65 to 60.
▪ First Home Super Scheme – to be extended for withdrawals up to $50,000, plus some technical changes for tax and | 4
administration errors in applications.
▪ Victims of domestic violence – the Government will not proceed with its previous proposal to extend the early release of
super to victims of family and domestic violence.
▪ Pension Loans Scheme – will be expanded to allow access up to 2 lump sums in any 12-month period (up to a total of
50% of the maximum annual Age Pension); together with a Government guarantee that “No Negative Equity” will apply.
At the same time, the Budget did not contain any change to the legislated Super Guarantee rate increase from 9.5% to 10% for
Medicare levy low-income thresholds for 2020-21
For the 2020-21 income year, the Medicare levy low-income threshold for singles will be increased to $23,226 (up from $22,801 for
2019-20). For couples with no children, the family income threshold will be increased to $39,167 (up from $38,474 for 2019-20). | 10
The additional amount of threshold for each dependent child or student will be increased to $3,597 (up from $3,533).
For single seniors and pensioners eligible for the SAPTO, the Medicare levy low-income threshold will be increased to $36,705 (up
from $36,056 for 2019-20). The family threshold for seniors and pensioners will be increased to $51,094 (up from $50,191), plus
$3,597 for each dependent child or student.
Date of effect
The increased thresholds will apply to the 2020-21 and later income years. Note that legislation is required to amend the thresholds
and a Bill will be introduced shortly
Find out all the fine print details from our professional body IPA
Where to get Budget documents
The 2021-22 Budget Papers are available from the following website:
▪ Budget 2021-22 – https://budget.gov.au