Federal Budget 2021-22

The Government has decided not to go down the austerity path, which will be a relief for many taxpayers and businesses.

Rather, the Government has decided to put its foot on the accelerator with the hope that the growth in the economy over a long period of time will help to pay down the debt that has been central to the Government’s response to COVID-19.

On personal taxation, in an expected announcement, the Government confirmed that it will extend the low and middle income tax offset (LMITO) beyond 2020-21 so that taxpayers will continue to receive the tax offset (between $255 and $1,080) in the 2021-22 income year.

In summary, 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 tax-deferred 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.

You can also read Federal Budget 2021-22: BUSINESS here.