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On the 11th of May 2021, the 2021 Federal Budget was handed down.

The announcement included maintaining personal income tax cuts brought forward last year. These announcements will deliver tax relief to low- and middle-income earners for the 2021-22 income year.

The Treasurer also announced a range of taxation benefits for small and medium businesses, intended to stimulate the business sector leading to jobs growth.

This summary provides coverage of the key issues:

Personal Income Tax

Retaining the Low and Middle-Income Tax Offset (LAMITO) for 2021-2022, worth up to $1,080 for individuals or up to $2,160 for couples.


Business Owners

Continuation of the provision allowing small business (aggregated annual turnover of less than $5 billion) to instantly write-off asset purchases enabling them to deduct the full cost of eligible capital assets acquired and first used or installed by 30 June 2023. This incentive can also be applied to the cost of improvements to existing assets.

Temporary losses can now be carried back for an extra year, to support cash flow by allowing eligible companies to carry-back tax losses from the 2019/20, 2020/21, 2021/22, and now the 2022/23 income years to offset previously taxed profits in 2018-19 or later income years. This will generate a refundable tax offset in the year in which the loss is made. This now also applies to businesses with an aggregated annual turnover of less than $5 billion.


Employment Incentives

Funding has been allocated to reduce the cost of child care for families with 2 or more children under 5 years, in child care and to boost workforce participation. The subsidy cap for high-income earners has also been removed.


Focusing on improving Australia’s Digital skills base, funding has been promised to provide cadetships and scholarships in emerging fields, such as artificial intelligence, quantum computing, robotics and cybersecurity. The JobTrainer program has been extended for an additional 12 months until 31 December 2022.


More flexibility around Superannuation

  • Repeal of the work test: Currently, Australians aged 67 – 74 must satisfy a work test (or the work test exemption) to be eligible to make super contributions. The work test will no longer apply when making non-concessional super contributions or salary sacrificed contributions. People in this age group will also be able to access the non-concessional bring forward arrangement, subject to meeting the relevant eligibility criteria.
  • Downsizer contributions age reduced: The age at which people are eligible to make a downsizer contribution will reduce from 65 to 60. This will allow an after-tax contribution of up to $300,000 per person when they sell their family home.
  • Removal of the minimum income threshold for super guarantee: The Budget removes the current $450 per month minimum income threshold under which employees do not have Superannuation Guarantee (SG) paid by their employer. The Government says that around 300,000 individuals will receive additional SG payments, 63% of whom are women.
  • Access to lump sums under Pension Loan Scheme (PLS): The PLS is a voluntary, reverse mortgage type loan provided by the Government. It is designed to assist older Australians to boost their retirement income by unlocking the equity in their Australian property. Through the PLS, people can receive regular fortnightly payments with the payments accruing as a debt secured against their property.

A new option is to receive up to two lump sums of up to 50% of the Age Pension in a 12-month period. The maximum lump sum amount will depend on whether the individual is single or a member of a couple.

  • Legacy retirement product conversions: Consumers will be provided with a temporary option to transition from some legacy retirement products including to more flexible retirement products. Currently, individuals are locked into certain products that restrict access to capital and flexibility of drawdowns.

Products covered include market-linked and life-expectancy retirement products commenced prior to 20 September 2007 from any provider, including self-managed superannuation funds (SMSFs), and lifetime products from SMSFs.

A two-year period will be provided for these retirement products and expected to commence from 1 July 2022. Individuals would need to consider social security consequences and any income tax cost.


Homeownership proposals

  • First Home Super Saver Scheme (FHSSS): The FHSSS, which was introduced in the 2017/18 Budget, allows people to save money for their first home inside their super. The Government will increase the maximum amount of voluntary contributions that can be released under the FHSSS from $30,000 to $50,000.
  • Family Home Guarantee for single parents: The Government has introduced the Family Home Guarantee as a way of providing a pathway to homeownership to support single parents with dependents. This is regardless of whether they are a first home buyer or a previous owner-occupier.

From 1 July 2021, 10,000 guarantees will be made available over four years to eligible single parents with a deposit of as little as 2%, subject to an individual’s ability to service a loan.

  • New Home Guarantee: The Government is providing a further 10,000 places under the New Home Guarantee in 2021/22. This is specifically for first home buyers seeking to build a new home or purchase a newly built home with a deposit of as little as 5%.


Aged Care and Women’s Health

  • Response to the Royal Commission into Aged Care Quality and Safety: The Government announced an additional $17.7 billion over five years for aged care. Some of the proposals include:
    • 80,000 additional Home Care Packages over the next two years
    • introducing a new star rating to allow Aged Care recipients and their families to compare Aged Care providers on performance, quality and safety
    • implementing a new funding model
    • increasing the Government’s Basic Daily Fee supplement by $10 per day per resident, and
    • from early 2022, informal carers and older Australians will benefit from increased funding to improve access to respite care and support through the Government’s Carer Gateway.

We will provide further details in relation to the items mentioned above over the next few weeks.

Full details are available here

Best Regards,

Simon Chesson

AAG AustAsia

AAG AustAsia

AAG is a family-owned group providing Tax planning, management accounting, wealth management, and more. Established in 1979, AAG acts entirely in their clients' best interest by providing financial expertise and upholds a reputation of nurturing long-lasting relationships with clients to assist them with all their personal and business financial issues.