2021-2022 Budget Summary

On Tuesday, 11 May 2021, Treasurer Josh Frydenberg handed down the 2021-22 Federal Budget, his 3rd Budget.

The major tax-related measures announced in the Budget included:

• Personal tax rates – no changes were made to personal tax rates, the Government having already brought forward the Stage 2 tax rates to 1 July 2020. The Stage 3 personal income tax cuts remain unchanged and will commence in 2024-25 as already legislated.
• 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 income year.
• 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.

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• Superannuation contributions work test – to be repealed from 1 July 2022 for voluntary non-concessional and salary sacrificed contributions for those under age 75.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 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 2021-22.

As previously announced, the Budget confirmed:

• 30% Digital Games Tax Offset – for eligible businesses that spend a minimum of $500,000 on qualifying Australian games expenditure (excluding gambling) from 1 July 2022.
• Intangible assets depreciation – option to self-assess effective life for certain intangible assets (eg intellectual property and in-house software).
• Brewers and distillers – the excise refund cap for small brewers and distillers will increase to $350,000 from 1 July 2021.
• Venture capital – a review of the venture capital tax concessions will be undertaken in 2021.
• Child care – increased subsidies from 1 July 2022.