This year’s Federal Budget covers a range of measures including tax and support for home buyers, businesses and families, superannuation, child care and age care.
Note: These changes are proposals only and may or may not be made law.
Personal tax relief
- Extension of tax offset:
The Low and Middle-Income Tax Offset (LMITO), worth up to $1,080, has been extended for an additional 12 months to cover the 2021/22 financial year. LMITO will be received once individuals lodge their tax return for the 2021/22 financial year.
Home ownership 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 home ownership to support single parents with dependants. 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%.
Business tax incentives extended
- Temporary full expensing:
The temporary investment tax incentive announced in last year’s Budget has been extended for a further 12 months until 30 June 2023 giving businesses additional time to utilise the incentive and including for projects requiring longer planning times. Businesses with a turnover up to $5 billion will be able to deduct the full cost of any eligible asset they purchase for their business, including the cost of improvements to existing assets, until 30 June 2023.
- Temporary loss carry-back provision:
Companies will now be permitted to carry back tax losses for an extra 12 months from the 2019/20, 2020/21, 2021/22, and now 2022/23 income years to offset previously taxed profits in 2018/19 or later income years. This too applies to businesses with an aggregated turnover of less than $5 billion.
- Addressing Workforce Shortages in Key Areas — JobTrainer Fund — extension:
The Government will provide $506.3 million over two years from 2021-22 to extend the JobTrainer Fund. This includes an additional $500.0 million in funding for the National Partnership Agreement on the JobTrainer Fund, to be matched by contributions from the states and territories, to deliver around 163,000 additional low fee and free training places in areas of skills need, including 33,800 additional training places to support aged care skills needs and 10,000 places for digital skills courses.
- Building Skills for the Future — Boosting Apprenticeship Commencements wage subsidy — expansion
The Government will provide an additional $2.7 billion over four years from 2020-21 to expand the Boosting Apprenticeship Commencements wage subsidy to further support businesses and Group Training Organisations to take on new apprentices and trainees. This measure will uncap the number of eligible places and increase the duration of the 50 per cent wage subsidy to 12 months from the date an apprentice or trainee commences with their employer. From 5 October 2020 to 31 March 2022, businesses of any size can claim the Boosting Apprenticeship Commencements wage subsidy for new apprentices or trainees who commence during this period. Eligible businesses will be reimbursed up to 50 per cent of an apprentice or trainee's wages of up to $7,000 per quarter for 12 months.
- SME Recovery Loan Scheme:
The Government will support the economic recovery of, and provide continued assistance to, firms that received JobKeeper or are eligible flood-affected businesses through the SME Recovery Loan Scheme.
The Government will provide participating lenders with a guarantee for 80 per cent of secured or unsecured loans of up to $5 million for a term of up to 10 years and with interest rates capped at 7.5 per cent, with some flexibility around variable rate loans. Loans can be used by the SME for a broad range of business purposes, including to support investment and refinancing existing loans. Lenders will be able to offer borrowers a repayment pause of up to two years.
To be eligible, SMEs, including self-employed individuals and non-profit organisations, will have a turnover of up to $250 million and have been either:
- recipients of the JobKeeper Payment between 4 January 2021 and 28 March 2021
- located or operating in a local government area that has been disaster declared as a result of the March 2021 New South Wales floods and were negatively economically impacted.
More flexibility around super
- 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 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 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.
Child care and pre-schools
- Child care subsidy:
Starting on 1 July 2022 the Government will provide $1.7 billion over 5 years (and $671.2 million per year ongoing) to:
- Increase the child care subsidies available to families with more than one child aged five and under in child care, benefitting around 250,000 families
- for those families with more than one child in child care, the level of subsidy received will increase by 30 percent to a maximum subsidy of 95 per cent of fees paid for their second and subsequent children.
- remove the $10,560 cap on the Child Care Subsidy, benefitting around 18,000 families.
- Increasing the Flexibility of the Pension Loans Scheme:
The Government will provide $21.2 million over four years from 2021-22 to improve the uptake of the Pension Loans Scheme by:
- allowing participants to access up to two lump sum advances in any 12-month period, up to a total value of 50 per cent of the maximum annual rate of the Age Pension
- introducing a No Negative Equity Guarantee so borrowers will not have to repay more than the market value of their property
- raising awareness of the Pension Loans Scheme through improved public messaging and branding.
- 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.
Sources: MLC, Macquarie
This document has been prepared by HQ Financial Solutions, an Authorized Representative of Lifespan Financial Planning Pty Ltd ABN 23 065 921 735,AFSL No.229892 based on providing for information purpose only. Accordingly, reliance should not be placed on this material as the basis for making an investment, financial or other decision. While all care has been taken in the preparation of this document (using sources believed to be reliable and accurate), to the maximum extent permitted by law, no person including HQ Financial Solutions, Halle Yilmaz or Lifespan Financial Planning Pty Ltd, accepts responsibility for any loss suffered by any person arising from reliance on this information. Before acting on this material, you should consider its appropriateness, having regard to your financial circumstances and needs, and whether those changes may ,may not be made law, and talked to a specialist in that field.
Halle Yilmaz is a financial adviser and business consultant. As a financial adviser, she gives solid advice that can create rapid and lasting results for her clients. Sign up for her free E-Book and download “7 Steps to Healthy Wealth Management.