This Budget is a balancing act between a far-less than expected deficit, prospects of an early election (November?), and the need to invest to be able to compete in the world over the long term.   It is interesting that the Treasurer assumes international travel and migration will remain low to mid-2022.

Plenty of money will go to special interest groups, especially aged care, mental health, women's economic packages, and disability.   A cynic could say these are voter focused.

Personal Tax Changes

Low and Middle Income Tax Offset

Extended to 30 June 2022, providing a reduction in tax of up to $1,080 for individuals with incomes between $48,000 and $90,000 and reducing by 3% in the dollar between $90,000 and $126,000.   The offset is triggered when the 2022 tax return is lodged.

Tax Residency

A new framework, where the primary test is for a person to live in Australia for more than 183 days in a year.   If this test is not met, secondary tests can be applied.

Business Taxpayers

Temporary Full Expensing

The cost of new and second-hand assets can be fully deductible in the year of acquisition, and has now been extended to 30 June 2023.   The limit on cars remains at $59,136.

Loss-carry back

Losses in any of the years 2019/20 to 2022/23 can be carried back to reduce profits (and the tax paid) for years 2018/19 to 2021/22.   Companies not electing to carry back losses can still carry losses forward as normal.

Debt Recovery for Small Business

Small business (including individuals) can apply to the Administrative Affairs Tribunal to pause or modify ATO debt recovery actions where the debt is being disputed in the Tribunal.   Currently, the only remedy is through the courts.

Storm and Flood Grants received in 2020/21

Will be made exempt from tax for primary producers and small businesses.

Superannuation

No Work Test for Non-Concessional Contributions

Individuals aged 67 to 74 can make non-concessional (not deductible) contributions without meeting the work test.   To claim personal contributions though requires the work test to be met (40 hours over not more than 30 consecutive days in the income years).

Downsizer Contributions (Sale of principal residence owned for 10 or more years)

The age limit is reduced from 65 to 60 allowing one-off non-concessional contributions up to $300,000 per person.

Threshold for Super Guarantee

All income payments to employees now require SG contributions by their employer, previously no SG if less than $450 per month minimum income.

Super Guarantee

From 1 July 2021, increased to 10%.

Super Timing   -   Warning!

The measures are to take effect from 'the start of the first income year after Royal Assent', so may not be available before 1 July 2022.

Insolvency

Further streamlining of insolvency laws, including a review of trusts under insolvency, a review of the safe harbour trading provisions (which allow distressed businesses to trade out of debt), introduction of a moratorium on creditor enforcement while a scheme of arrangement is being negotiated, and an increase in the limit from $2,000 to $4,000 for the issue of a statutory demand on a company.

SUMMARY

Our concern and newsletter as always concentrates on the key   business and tax initiatives to be aware of.   We've only provided a quick overview, but if you have an interest we can get more detail to you.