On 11 May 2021 the Budget for 2021–22 was released. The measures announced as part of the 2021–22 Budget are subject to receiving royal assent and are not yet law.

There are a number of changes that may have an impact on your business, personal or superannuation situation. The key points are:

Personal income tax

1. Retaining the Low and Middle Income Tax Offset ('LMITO')

The Government has announced that it will retain the LMITO for one more income year, so that it will still be available for the 2022 income year. Under current legislation, the LMITO was due to be removed from 1 July 2021.

The maximum offset proposed for the 2022 income year is $1,080 per annum. However, the amount you receive depends on your income and how much tax you've paid throughout the year. It doesn't mean that you will automatically get an extra $1,080 in your tax return.

2. Increasing the Medicare levy low-income thresholds

The Government will increase the Medicare levy low-income thresholds for singles, families and seniors and pensioners for the 2021 income year, as follows:

  • The threshold for singles will be increased from $22,801 to $23,226.
  • The family threshold will be increased from $38,474 to $39,167.
  • The threshold for single seniors and pensioners will be increased from $36,056 to $36,705.
  • The family threshold for seniors and pensioners will be increased from $50,191 to $51,094.

For each dependent child or student, the family income thresholds increase by a further $3,597, up from the previous amount of $3,533.

Business income tax

1. Temporary full expensing extension

In the 2021/22 Federal Budget, the Government has announced that temporary full expensing will be extended by 12 months until 30 June 2023 to 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. All other elements of temporary full expensing will remain unchanged, including the alternative eligibility test based on total income, which will continue to be available to businesses.

2. Temporary loss carry-back extension

In the prior year (2020/21) Federal Budget, the Government announced amendments to introduce a temporary loss carry-back measure. Broadly, this initial measure allowed 'corporate tax entities' with an aggregated turnover of less than $5 billion to carry back tax losses made in the 2020, 2021 and/or 2022 income years to claim a refund of tax paid (by way of a tax offset) in relation to the 2019, 2020 and/or 2021 income years.

In the 2021/22 Federal Budget, the Government has announced that the loss carry-back measure will be extended to allow eligible companies (i.e., with aggregated turnover of less than $5 billion) to also carry back (utilise) tax losses from the 2023 income year to offset previously taxed profits as far back as the 2019 income year when they lodge their tax return for the 2023 income year.

Eligible entities get the offset by choosing to carry back losses to earlier years in which there were income tax liabilities. The offset effectively represents the tax the eligible entity would save if it was able to deduct the loss in the earlier year using the loss year tax rate. As it is a refundable tax offset, it may result in a cash refund, a reduced tax liability or a reduction of a debt owing to the ATO.

The eligible entity does not need to amend the earlier income years to claim the offset.

Consistent with the current law, the tax refund available under this measure is limited by requiring that the amount carried back is not more than the earlier taxed profits and does not generate a franking account deficit. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.

Superannuation

Please refer to our article '2021-22 Federal Budget Update – A strong Budget for SMSFs' for the detail regarding superannuation changes.

Please feel free to contact us on 1300 885 761 if you have any questions or would like further information in regards to any of the above changes.