Tuesday the 11th of May marked our eighth budget to be handed down by the Liberal/National Coalition since their election to government at the 2013 federal election, and the third budget to be handed down by Frydenberg and the Morrison Government. Whilst last year saw Australia reporting its largest budget deficit since the Second World War (submitted 5 months late in October), this year’s tagline is ‘securing Australia’s recovery’ from COVID-19.
Announcing $121.4 billion in funding aimed at creating 250,000 more jobs and kick-starting Australia’s economy, it covers a range of measures including new spending commitments directed at the ‘Care Economy’, superannuation, tax and ongoing support for business owners.
Note: These changes are proposals only and may or may not be made law.
Individuals & Families
Personal tax relief
- Extension of tax offset: as expected, the Morrison government has extended the Low and Middle-Income Tax Offset (LMITO), worth up to $1,080, for an additional 12 months to cover the 2021/2022 financial year.
Taxpayers earning $37,000 or less will access an offset of up to $255
Those earning between $37,000 and $48,000 will receive an extra 7.5 cents per dollar until they reach the maximum offset of $1080
Taxpayers earning between $48,000 and $90,000 will receive the maximum offset of $1080
Those earning between $90,000 and $126,000 will receive some benefit, too, with the size of the offset falling by 3 cents per extra dollar in income
Taxpayers will receive the offset after they lodge their tax returns for the 2021-22 income year.
Home ownership proposals
- First Home Loan Deposit Scheme: An additional 10,000 places have been added, where the Government underwrites loans to first-home buyers so they can build a new home with a deposit as low as 5 per cent.
- Family Home Guarantee: Another scheme that will offer Government loan guarantees to 10,000 single parents so they can buy a home with a 2 per cent deposit.
- First Home Super Saver Scheme: Voluntary superannuation contribution members can release will increase from $30,000 to $50,000.
In 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.
- 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.
Health and social security proposals
- Investing in mental health care: $2.3 billion investment to will massively boost suicide prevention, early intervention and psychology services.
- Women’s health and wellbeing: $353.9M for a range of initiatives supporting women’s health and wellbeing.
Starting on 1 July 2022 the Government will provide $1.7 billion over 5 years (and $671.2 million per year ongoing) to:
- Removed subsidy cap: Government will scrap the $10,560 annual cap on the Child care Subsidy for high income earners.
- Increased subsidy: For families with more than one child aged five and under in care, the Child Care Subsidy will be increased by 30 percentage points to a maximum of 95 per cent of costs for second and subsequent children.
Business tax incentives extended
The Government will extent the 2020-21 Budget measure titled JobMaker Plan – to support business investment and creation of more jobs for 12 months until 20 June 2023.
- Temporary full expensing extension (formerly known as instant asset write-off): Allows businesses with annual turnover of less than $5 billion to immediately deduct from their tax bill the full cost of eligible depreciable assets up to any value. Aimed at boosting investment, this will apply to assets purchased after 7.30pm on October 6, 2020 and first used or installed ready for use by June 30, 2023.
- Temporary loss carry-back extension: This allows businesses, when they lodge their 2022-23 tax return, to carry back tax losses from the 2022-23 income year to offset previously taxed profits as far back as 2018-19, ultimately supporting cash flow.
- Addressing Workforce Shortages in Key Areas: $506.3 million over two years to extend the JobTrainer Fund.
- Building Skills for the Future: Additional $2.7 billion over four years to expand the Boosting Apprenticeship Commencements wage subsidy to further support businesses and Group Training Organisations to take on new apprentices and trainees.
- 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.
The key proposals
- More super: Employers will contribute more to employee’s superannuation after the government scrapped the requirement for employees to earn at least $450 a month before they qualify for compulsory employer contributions.
- Removal of work-test: For people aged 67-74 in respect to salary sacrifice and non-concessional contributions (NCCs).
- Pension Loans Scheme: The government’s own reverse mortgage product was made more flexible. Participants can now access up to 26 fortnights’ worth of top-up payments as a lump sum payment.
- Downsizer contribution: Can be made from age 60 allowing downsizers to contribute a one-off sum of up to $300,000 into their super.
- The Super Guarantee (SG): Scheduled to increase from 9.5% to 10% on the 1st of July 2021, as previously legislated.
Also, keep in mind that the announcements made in the Budget remain proposals at this stage. All of the proposals mentioned must be passed by Parliament before they become law.
Have a question about this year’s Federal Budget Summary and what it may mean for you and/or your business? Get in touch with one of our Gallagher experts today.
The information and any advice in this article does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. When considering whether to acquire a financial product, before making any decision, you should obtain the relevant product disclosure statement.