Budget 2021 for 2021-22

The 2021 Budget speech for the 2021-22 financial year was delivered on Tuesday, 11 May 2021.

Key Budget tax-related announcements included:

• The the Low & Middle Income Tax Offset (LMITO) will be extended to 2021–22. No further, or other tax scale rate changes were announced.
• Medicare Levy low income thresholds annual CPI adjustment (the usual annual adjustment).
• the law will be changed to introduce greater clarity to tax residency rules for individuals, by relying primarily on a “bright line” test of 183 days or more physical presence as the basis of tax residency. Secondary criteria are to be measurable and objective. Timing: To have effect from the first income year after the date of Royal Assent of the enabling legislation.
• the requirement to exclude the first $250 of deductions in the calculation of self-education expenses is to be removed. Timing: With effect from the first income year after the date of Royal Assent of the enabling legislation.
• Child Care Subsidy cap of $10,560 to be removed
• Super Guarantee minimum monthly income threshold of $450 is to be removed. Timing: Enabling legislation is expected to take effect from 1 July 2022.
• The Work Test for non-concessional or salary sacrifice super contributions currently required of older persons (aged 67 to 74) to be removed, subject to legislation expected to take effect from 1 July 2022. Personal deductible contributions will continue to be subject to the work test.
• Super downsizer (sale of principal residence) contributions age threshold is to be reduced to 60 years (from 65) – with effect from 1 July 2022
• Business instant asset temporary full expensing to be extended for a further year until 30 June 2023
• Companies loss carry-back availability to be extended for a further year until 30 June 2023
• Effective Life of patents, registered designs, copyright & in-house software can be self-assessed from 1 July 2023 (currently a statutory effective life)
• Cessation of employment to be removed as a taxing point for employee share scheme interests. Timing: To apply to ESS interests issued from the first income year after the date of Royal Assent of the enabling legislation.
• To encourage investment in the sectors, income from medical and biotech patents to be taxed at a concessional corporate rate of 17%. Timing: From 1 July 2022. The government will consult on whether to extend the scheme to the clean energy sector. See:
  • Patent box tax regime – 2021 Budget Review
  • Unboxing the Australian Government’s $100m patent scheme – King & Wood Mallesons
  • Patent Box discussion paper – Treasury
• Australian digital games developers: From 1 July 2022, the Digital Games Tax Offset will provide eligible developers with a 30% refundable tax offset for qualifying Australian games expenditure.
• Relaxation of residency rules for SMSFs to enable members to continue to contribute to their superannuation fund whilst temporarily overseas. The measure is designed to achieve parity with APRA-regulated funds. Timing: From the start of the first financial year after Royal Assent of the enabling legislation, which is expected before 1 July 2022.

[May 8, 2021] First Home Super Saver Scheme: The maximum voluntary super contributions which can be released will be increased to $50,000 (and other measures) – see media release. Timing: Enabling legislation is expected to take effect from 1 July 2022.

[May 6, 2021] Proposed measures: Australia’s Digital Economy, Investment Incentives – a digital games tax offset, self-assessment of intangible assets effective life, and a review of venture capital tax concessions. See Investment Incentives.

Resources

• BDO – Federal Budget 2021-22
• RSM Australia – Federal Budget 2021-22
• Deloitte’s Federal Budget 2021-22
• Wolters Kluwer 2021-22 Tax and Accounting Budget Report
• 2021 Budget – Red is the New Black – Ban Tacs
• 2021-22 Budget at a glance – Parliamentary Budget Office
• Guide to the budget papers – Parliamentary Budget Office
• budget.gov.au – Official government budget website:
• Budget Paper No. 2