Parliament house Canberra
Tax & Accounting11/05/2021 12:00:00 AM

CCH Federal Budget Report 2021 Tax and Accounting

The Federal Treasurer, Mr Josh Frydenberg, handed down the 2021–22 Federal Budget at 7:30 pm (AEST) on 11 May 2021.

A stronger than expected economic recovery from the COVID-19 recession has resulted in a budget deficit of $161 billion, $52.7 billion lower than the government's expected deficit. With the virus still a threat to the global and domestic economy, the Budget contains various measures to support businesses and individuals with job creation, incentives, tax relief and superannuation changes.

Existing tax reliefs, including the low and middle income tax offset, the temporary company loss carry back rules and the full expensing of depreciating assets will be extended for another 12 months. Other key changes include a modernised individual tax residency bright-line test, tax concessions for medical and biotechnology innovations and removal of the $450 threshold to be eligible for superannuation guarantee. 

The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au
The tax, superannuation and social security highlights are set out below.

Individuals

  • The low and middle income tax offset, available to taxpayers earning less than $126,000 per year, will remain for the 2021–22 income year.
  • Individual tax residency rules to be simplified under new framework.
  • The current limitation for claiming a self-education expense, where the first $250 of the allowable deduction is denied, will be removed.
  • CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2020–21 year announced.
  • A full income tax exemption for pay and allowances of ADF personnel deployed to Operation Paladin from 1 July 2020.
  • Funding to increase home ownership, support jobs in the residential construction sector and enhance housing data. 

Companies and business

  • Temporary full expensing of eligible assets will be extended by 12 months to 30 June 2023. 
  • The temporary loss carry back offset will be extended by one year to apply for 2022–23 income year losses. 
  • Extended powers for AAT to pause or modify ATO debt recovery action for small business taxation decisions. 
  • Superannuation guarantee exemption for employees earning less than $450 in a month will be removed. 
  • The cessation of employment taxing point will be removed for tax-deferred employee share schemes that are available for all companies. 
  • A refundable tax offset for investing in qualifying Australian games expenditure will be introduced from 1 July 2022. 
  • Taxpayers with certain intangible depreciating assets will be given the choice of using the statutory effective life or self-assessing the decline in value from 1 July 2023. 
  • Corporate income derived from Australian medical and biotechnology patents in income years starting on or after 1 July 2022 will be taxed at a concessional rate of 17%. 
  • Income tax exemption for qualifying grants made to primary producers and small businesses affected by the storms and floods in Australia. 
  • A new early engagement service will be implemented to assist foreign investors and give them confidence to invest in Australian businesses. 
  • The corporate collective investment vehicle tax and regulatory framework will be finalised with a revised start date of 1 July 2022. 
  • Technical amendments will be made to the taxation of financial arrangements rules which will include facilitating access to hedging rules on a portfolio hedging basis. 
  • The junior minerals exploration incentive which was due to end in 2020–21 will be extended 4 more years, from 1 July 2021 to 30 June 2025. 
  • A temporary levy will be imposed on offshore petroleum production to recover costs of decommissioning the Laminaria-Corallina oil fields and associated infrastructure. 
  • The heavy vehicle road user charge will be increased from 25.8 cents per litre to 26.4 cents per litre from 1 July 2021. 
  • The Boosting Apprenticeship Commencements wage subsidy will be expanded.

Not-for-profits

  • From 1 July 2023 income tax exempt NFPs with an active ABN will be required to submit the information used to self-assess their eligibility for the exemption in an online annual self-review form. 
  • Australian Associated Press Ltd, Virtual War Memorial Limited and Scripture Union Queensland have been added to the list of specifically listed DGRs for a period beginning 1 July 2021. 
  • Cambridge Australia Scholarships Limited and Foundation 1901 Limited have had their DGR status extended by 5 years. 

International tax

  • Concessional tax treatment for offshore banking units will be removed.
  • The list of jurisdictions that have an effective information sharing agreement with Australia will be updated. 
  • New Zealand will maintain its primary taxing right over members of its sporting teams and support staff located in Australia due to COVID-19. 

Superannuation

  • From 1 July 2022, individuals aged 67 to 74 will no longer be required to meet the work test when making or receiving non-concessional superannuation contributions or salary sacrificed contributions. 
  • From 1 July 2022, the eligibility age to make downsizer contributions into superannuation will be reduced from 65 to 60 years of age. 
    The maximum amount of contributions that can be released from superannuation under the first home super saver scheme (FHSSS) will be increased from $30,000 to $50,000 from 1 July 2022. 
  • Technical amendments will be made to the first home super saver scheme (FHSSS) legislation to improve its operation and assist those who make errors in their FHSSS release applications. 
  • The central management and control safe harbour test for an SMSF to be considered an Australian superannuation fund will be extended from 2 years to 5 years. Also, the active member test will be removed. 
  • Pensioners with a market-linked, life expectancy or lifetime pension in their superannuation fund will be granted a 2-year window in which they can choose to commute the outstanding benefit plus any associated reserves into a contemporary superannuation pension. 
  • The government will not proceed with a measure to extend early release of superannuation to victims of family and domestic violence. 
  • The ATO will be given additional funding to administer the transfer of unclaimed superannuation money directly to KiwiSaver accounts. 

Aged care and social security

  • A total of $17.7 billion in funding will be provided for aged care initiatives in response to the Royal Commission on Aged Care Quality and Safety. 
  • Changes to the pension loans scheme to improve uptake include access to 2 advance payments (conditions apply), and the introduction of a “no negative equity guarantee”. 
  • The childcare subsidy will be increased up to a maximum of 95% from 1 July 2022.
  • The base rate of several unemployment benefits will be increased by $50 per fortnight from 1 April 2021. Other eligibility conditions and waiting periods have also been relaxed. 

Excise and import duties

  • Excise relief for small brewers and distillers will be expanded.
  • The automotive research and development tariff concession will be extended for 4 years until 30 June 2025. 
  • Australia's anti-dumping regime will be reformed to make the system easier for businesses to navigate.