The 2021/22 Federal Budget was handed down on 11th of May which showed an improvement in the budget deficit as well as a reduction in unemployment rates since the impact of COVID has been felt.
We have collated some key points surrounding Tax and Superannuation changes that may affect you.
Individuals and Small Business
Low and Middle Income Tax Offset
The Low and Middle Income Tax Offset will continue to apply for the 2021-22 Income Year. Taxpayers with Taxable Income between $48,001 – $90,000 will receive the full $1,080 offset. For taxpayers with Incomes above and below this range, the offset will be adjusted accordingly as follows –
|Less than $37,000||$255|
|$37,001 – $48,000||Increasing by 7.5c per $1 over $37,000, capped at $1,080|
|$48,001 – $90,000||Maximum $1,080|
|$90,001 – $126,000||Reducing from Maximum at 3c per $1 over $90,000|
The $250 exclusion that applies to self-education deductions will be removed allowing the entire amount of eligible self-education expenses to be deductible.
Residency Test Changes
The existing tests will be replaced with a primary ‘bright line’ test. This test provides that any person who is physically present in Australia for 183 days or more is to be considered an Australian Resident.
This change has been adopted based on recommendations from the Board of Taxation with the aim of simplifying the process of determining if an individual is an Australian Resident for tax purposes.
If the ‘bright line’ test is not met, there will be secondary tests that can be used to determine Residency.
Instant Asset Write Off
Full expensing of assets has now been extended to 30 June 2023 for Small Business. Assets must be first installed and ready for use by 30 June 2023.
Please note, when assets are sold, full sale proceeds must be recognised as income if the asset has been fully written off.
Super Contributions Work Test
The Work Test declaration will be repealed for voluntary non-concessional and salary sacrificed contributions for the individuals aged 67 to 74 from 1 July 2022.
As a result, individuals aged under 75 will be allowed to make and receive non-concessional or salary sacrifice contributions from 1 July 2022 without meeting the Work Test (subject to existing caps).
Note: The Work Test still applies if an individual wishes to make personal deductible contributions.
Super Guarantee $450 Threshold Removed
Historically, Super Guarantee payments were not required for employees who earned less than $450 per month. This requirement will be abolished from 1 July 2022 with Superannuation Guarantee payments being compulsory for each $1 of employment income.
SGC Rate from 1 July 2021 = 10%
This rate is increasing by 0.5% per year until it reaches 12%
Downsizer Contribution Eligibility Age Reduced
The minimum eligibility age to make downsize contributions into superannuation will be lowered to age 60 (down from age 65) from 1 July 2022.
Individuals aged over 60 will be able to make an additional concessional contribution of up to $300,000 (or $600,000 for couples) from the proceeds of selling their home. The home must have been owned for 10 years and the entire contribution must come from the capital proceeds of the sale price.
First Home Super Scheme
The Maximum amount of voluntary superannuation contributions that can be released under the FHSS scheme will be increased to $50,000 (up from $30,000). These changes are expected to be in place from 1 July 2022.
This is only a summary of some of the changes that may affect you. If you have any queries about how these changes may affect you, we would be more than happy to discuss with you.