The Federal Budget – how it affects you.

While the 2021 Federal Budget was delivered in May, it seems to have come and gone without too much of a fuss. As always, our team was glued to the media on Tuesday 11 May to ensure we can provide you with information that is important to you. Below are just a few of the measures to be enacted.

  1. Loss carry back rule extended to 2023 – This will allow eligible companies to carry-back tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 income year. Companies with a combined annual turnover of up to $5 billion can apply tax losses incurred during the 2020, 2021, 2022 and now the 2023 income years to offset tax paid in the 2019 or later years. The tax refund will be available to companies when they lodge their 2021, 2022 and 2023 tax returns. This will help increase cash flow for businesses in future years and support companies that were profitable and paying tax but find themselves in a loss position as a result of Covid.
  2. Low & middle income tax offset extended to 2022 – The low and middle income tax offset (LMITO) is extended for a further year to June 2022. Around 10.2 million individuals are expected to benefit from retaining the offset, worth up to $1,080 for individuals or $2,160 for dual income couples.
  3. New test for determining tax residency – The new test will be a simple ‘bright line’ test: a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident. Individuals who do not meet the primary test will be subject to secondary tests that depend on a combination of physical presence in Australia and measurable, objective criteria.
  4. $450 per month minimum removed for super guarantee  – The government has elected to remove the $450 per month earnings threshold to determine if an employer is required to pay super for their employee. This change will commence from the start of the first financial year after the legislation receives Royal Assent. At this point in time, the government expects this to be from 1 July 2022 onwards.
  5. Temporary Instant Asset Write Off extended – Temporary instant asset write off has now been extended to 30 June 2023 (previously only to 30 June 2022). This will allow eligible businesses with combined annual turnover of $5 billion or less to deduct the full cost of eligible depreciable assets. Assets must be purchased after 6 October 2020 and installed and ready for use by 30 June 2023. Unfortunately, passenger cars are excluded from the above. The limit for these has increased to $59,136 from 1 July 2021.



Kim Jay