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2021-22 Budget Summary


May 17, 2021

Greg Brennan

Brennan Sloan Director

2021-22 Budget Summary

I have summarised the key Budget measures in the areas of Superannuation and Taxation as we consider these to be most relevant to our clients. Before acting on the Budget announcements, seek professional advice to ensure the law has been changed.

Superannuation reform

This budget contains a number of superannuation measures which should be beneficial to the retirement plans of many Australians.

Repealing the work test for certain superannuation contributions.

People aged 67 to 74 (inclusive) will be eligible to make non-concessional contributions (including bring forward contributions) or salary sacrifice contributions without the need to meet the work test. This measure will be effective from 1 July 2022.

Reducing the eligibility age for downsizer contributions

The eligibility age to make a downsizer contribution will be reduced from 65 to 60 years of age. The downsizer contribution allows eligible individuals to make a one-off post tax contribution to super of up to $300,000 (per person) from the sale of the proceeds of their home. This measure will be effective from 1 July 2022.

First Home Super Saver Scheme – Increasing the maximum releasable amount to $50,000

Under the existing scheme, the maximum releasable amount of voluntary contributions will be increased from $30,000 to $50,000. This measure will be effective from 1 July 2022.

Removing the $450 per month threshold for super guarantee eligibility

The $450 per month minimum income threshold under which employees do not have to be paid the super guarantee by an employer, will be removed. This measure will be effective from 1 July 2022.

SMSF – legacy retirement product conversion

Individuals will be given the ability to exit specific legacy retirement income products over a limited two year period. The specific products are Market Linked Income Streams, Term Allocated Pensions and Lifetime Pension and Annuity products. There will be an option to transition from these products to a more flexible retirement product such as an account-based pension. This measure will be effective from 1 July 2022.

SMSF – relaxing residency requirements

The residency requirements will be relaxed for SMSFs and APRA regulated funds by extending the central management and control temporary absence period from the current two years to five years and also removing the active member test. This will allow SMSF members to continue to make contributions to their fund while temporarily overseas. This measure will be effective from the beginning of the first financial year after Royal Assent of the enabling legislation.

Taxation reform

Low and middle income offset (LMITO) remaining for the 2021-22 tax year

The LMITO will remain in place for the 2021-22 financial year, providing tax relief for low and middle income taxpayers. LMITO provides a maximum reduction in tax of up to $1,080. This measure will be effective from 1 July 2021.

Temporary full expensing of eligible capital assets

The Government has announced it will extend the 2020-21 Budget measure of temporary full expensing until 30 June 2023. Eligible businesses with aggregated annual turnover of less than $5 billion will be able to deduct the full cost of eligible 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.

Temporary loss carry-back provisions for business

The Government will extend the 2020-21 Budget measure of temporary loss carry-back to support cash flow. The extension will allow eligible companies to carry back tax losses from the 2022-23 tax year to offset previously taxed profits as far back as the 2018-19 tax year.

Employee Share Schemes (ESS) – Removing cessation of employment as a taxing point

The Government has announced it will remove the cessation of employment taxing point for the taxdeferred Employee Share Schemes (ESS) that are available for all companies. This measure will be effective for ESS interests issued from the beginning of the first financial year after Royal Assent of the enabling legislation.

New framework for the individual tax residency rules

The primary test will be a simple test – a person who is physically present in Australia for 183 days or more in any tax year will be an Australian tax resident. Where the individual does not meet the primary test, there are secondary tests based on physical presence and other measurable criteria yet to be advised. This measure will be effective from the first financial year after Royal Assent of the enabling legislation.

Increasing the Medicare levy low-income thresholds

The Government has announced it will increase the Medicare levy low-income thresholds for singles, families, seniors and pensioners from the 2019-20 financial year. The increases take account of recent movements in CPI and is effective 1 July 2020.

Greg Brennan FCA

Brennan Sloan Director