Tuesday 11 May 2021 saw the Liberal government announce another budget, below is how the budget will affect individual and company tax, superannuation guarantee, childcare subsidies and NFP's.
Individual Tax Returns
The government will continue the 'Low and Middle Income Tax Offset' (LMITO) in the 2021/22 financial year. This offset reduces income tax payable anywhere from $255 to $1,080 depending on your taxable income.
Who is eligible: Anyone with taxable income under $126,000
The government will also continue the 'Low Income Tax Offset' (LITO) into the 2021/22 financial year. This offset reduces income tax payable up to $700.
Who is eligible: Anyone with taxable income under $66,667
Therefore some individuals may be entitled to a combination of the two tax offsets in the same financial year depending on their taxable income.
Individual Tax Rates
The government will also continue to reduce the income tax rates starting 1 July 2024 - which will reduce the taxation rate for individuals earning between $45,000 to $200,000 from between 32.5 - 37% to 30%
Previously the first $250 of Self-Education Expenses previously have not been deductible. However starting 1 July 2021 all self-education expenses will be deductible from $1 onwards.
Company Tax Returns
Starting 1 July 2021 the corporate tax rate for small and medium business will decrease to 25%.
The Instant Asset Write-Off will continue until 30 June 2023 - this is an extension of the COVID laws original brought in last year. A business can purchase an asset and it will be fully tax deductible when purchased from 6 October 2020 and is first used or installed ready for use by 30 June 2023.
The Carried-Back Losses extended another year. This tax offset is available to companies for the following period
The taxable loss was made in the financial years either 2019-20, 2020-21 or 2021-22
The tax lability has been previously paid in 2018-19, 2019-20 and 2020-21
The previously paid tax liability can be used as a credit against the taxable loss years from above.
This taxable refund of tax paid would then be cash refundable to the company (the below table from the ATO helps explain when a tax offset is available).
Other criteria that needs to be met include
There is a surplus in the franking credit balance in the year the company is claiming the offset
They have met their tax return lodgement obligations
Not-For-Profit Organisations
In 2022-23 financial year the ATO will have an online system in which Not-For-Profit Organisations (NFP) will need to submit an annual self-review form with the information needed to ensure that the organisation is eligible for the income tax exemption. This form will need to be completed for the financial year starting 1 July 2023 onwards.
Centrelink Benefits
Funds have been allocated to the Childcare Subsidies for some families, these changes will take affect from 1 July 2022
Childcare subsidies increased for families with more than 1 child (aged 5 and under) by adding additional 30% point subsidy for every second and third child
The Child Care Subsidy cap of $10,560 will be removed
Superannuation Guarantee (SG)
The Superannuation Guarantee threshold of $450 per month will be removed from 1 July 2022. Employers will be liable to pay superannuation for all employees no matter what they earn each month.
The compulsory superannuation payable to employees (known as Superannuation Guarantee) will also be increasing to 10% from 1 July 2021. As per the below, the government will be increasing this percentage by 0.5% each year until it reaches 12% from 1 July 2025.
The above information is sourced from the Institute of Public Accountants (IPA), The Tax Institute and the Australian Taxation Office (ATO).
If you have any questions regarding the changes and you would like to book a meeting to discuss further please use our calendar link (meet us image) via the contact us page.
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