THE 2021 BUDGET
Written by: Evan Lowenstein
For many years the budget has been handed down in May which has allowed time for the Government to introduce legislation that commenced on the 1 July of that year.
But COVID, along with everything else that has changed, meant that the budget was handed down in October this year.
Here are the highlights:
Personal Income Tax Cuts
The Government had originally slated the personal tax changes to be introduced commencing the 1 July 2022.
With these changes now brought forward to commence the 1 July 2020, it will see the following changes to the tax brackets:
- The point where the 19% tax bracket finishes has been increased from $37,000 to $45,000
- The Low Income Tax Offset (LITO) has been increased from $445 to $700 with a now higher amount where it shades out
- The point where the 32.5% tax bracket finishes has been increase from $90,000 to $120,000.
These changes will put more money back in the hands of low to middle-income earners. With the legislation to introduce this measure included as part of a number of other budget announcements, it’s not expected that these changes will take effect until mid to late December. It is anticipated that the ATO will release the new withholding tables to accommodate the above changes around this time.
Instant Asset Write Off
Businesses with a group turnover of less than $5 billion will be able to deduct the full cost of assets acquired which are first used or installed by the 30 June 2022. Although we haven’t seen the fine details on the operations of the program at this stage, we expect it will be consistent with incentive programs which have been limited to assets that can be depreciated excluding buildings and second hand assets. For businesses with a group turnover of less than $50 million, they will be able to deduct the full cost of second hand assets.
In addition to the above extension, where businesses with a group turnover of less than $10 million have been using a simplified depreciation pool, they will be able to write off the balance of the assets in the pool subject to a few special rules.
Temporary Loss Carry Back
Why make things simple when you can make them confusing?
Let’s try to explain this in an easy way, noting that this measure is for companies only.
If your company made a profit in 2018/2019 financial year but made a loss in 2019/2020 (or 2020/2021, or 2021/2022), it will be able to nominate to offset the loss against an earlier years profit and get a tax refund for the amount that is offset at the applicable tax rate.
It will be interesting to see how this works when this measure is put it in to law specifically looking at the applicable rate of tax, whether the offset is limited to the profit of 2018/2019 and the impact on the company’s franking account which determines its ability to pay out franked dividends.
Jobmaker
To go with JobSeeker, JobKeeper we now have JobMaker!
For workers aged between 16 and 35 (and I don’t know why they picked 35), who are currently receiving welfare payments employers will receive a hiring credit when taking on members of this group.
The amount an employer can receive is capped at $10,400 per employee and will be paid as follows:
- $200 per week where the worker is aged 16 to 29
- $100 per week where the worker is aged 30 to 35.
At this stage based on the initial information, employees will need to work a minimum of 20 hours per week and have been eligible recipients of welfare support payments for at least one month out of the three months prior to their employment.
It does raise the question if you have two suitably qualified candidates where one qualifies for Job Maker and the other doesn’t, which one chooses to employ?
Or even better, you have a 36 year old who is perfect for the job up against a 34 year old who is not quite as suitable but is eligible for JobMaker, which one do you employ?
First Home Loan Deposit Scheme
The scheme will be extended to an additional 10,000 first home buyers.
More in depth information on the scheme and how it operates can be found following the link:
https://www.nhfic.gov.au/what-we-do/fhlds/
These are the main items in the budget noting that if everything returns to normal, we will have another budget handed down in early May next year.
