The major tax-related measures announced in the Budget, includes the following:-
- Personal tax rates – there were no changes made to personal tax rates, the Government had already brought forward the Stage 2 tax rates to 1 July 2020. The Stage 3 personal income tax cuts remain unchanged and will commence in 2024-25 as already legislated.
- Medicare levy low-income thresholds for 2020-21 to increase –
- for the 2020-21 income year, the Medicare levy low-income threshold for singles will be increased to $23,226 (up from $22,801 for 2019-20).
- for couples with no children, the family income threshold will be increased to $39,167 (up from $38,474 for 2019-20).
- the additional amount of threshold for each dependent child or student will be increased to $3,597 (up from $3,533).
- Low and Middle Income Tax Offset (LMITO) retained for 2021-22 – the Government will retain the low and middle income tax offset for the 2021-22 income year. The LMITO provides a reduction in tax of up to $1,080.
- Child care subsidies to change 1 July 2022 – the Government confirmed that it will make an additional $1.7b investment in child care. The changes will commence on 1 July 2022 (that is not in the next financial year).
- Self-education expenses – The Government will remove the exclusion of the first $250 of deductions for prescribed courses of education. The first $250 of a prescribed course of education expense is currently not deductible.
- Individual residency test reformed – the Government will replace the existing tests for tax residency of individuals with a primary “bright line” test under which a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident.
- Loss carry-back provisions extended – the loss years in respect of which an eligible company (aggregated annual turnover of up to $5 billion) can currently carry back a tax loss (2019-20, 2020-21 and 2021-22) will now be extended to include the 2022-23 income year.
- Temporary claiming of full tax deduction for eligible depreciable assets extended – the Government will extend the 2020-21 temporary full expensing measures until 30 June 2023. This will allow eligible businesses with aggregated annual turnover or total income of less than $5 billion to claim a tax deduction for the full cost of eligible depreciable assets of any value (excluding land & buildings), acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023.
- Employee share schemes – the Government will remove the cessation of employment as a taxing point for the tax deferred employee share schemes along with other changes designed to cut down on “red tape” for certain employers.
- Tax Office debt recovery for small business – the AAT will be given the power to pause or modify ATO debt recovery action in relation to disputed debts of small businesses.
Source: Tax & Super Australia – 2021 Federal Budget Report
