Budget 2021 & 22

Expenditure vs Revenue

In his Budget speech, the Treasurer stated “Australia is coming back” with unemployment lower than pre pandemic levels (5.6%).
  • The deficit, thanks in part to surging iron ore prices, is lower than anticipated in the 2020-21 Federal Budget at $161 billion in 2020-21, a $52.7 billion improvement to estimates.
  • The underlying cash balance is expected to be a deficit of $106.6 billion in 2021-22 and continue to improve over the forward estimates to a deficit of $57 billion in 2024-25.
  • While the deficit is large, it did its job.Real GDP grew strongly over the latter half of 2020, marking the first time on record when Australia has experienced two consecutive quarters of economic growth above 3% – output is expected to have exceeded its pre-pandemic level in the March quarter of 2021.
  • Real GDP is forecast to grow by 25% in 2020-21, by 4.25% in 2021-22 and 2.5% in 2022-23. After falling by 2.5% in 2020, real GDP is expected to grow by 5.25% in 2021, and by 2.75% in 2022.

Revenue: Where 2021-22 Budget revenue comes from

Expenditure: How the 2021-22 Budget is spent

Budget 2021 & 22

Mental health and suicide prevention

The $2 billion National Mental Health and Suicide Prevention Plan funds a range of initiatives including the enhancement and expansion of digital mental health services, universal aftercare for those who have made a suicide attempt, and a network of Head of Health adult mental health centres and satellites to provide coordinated multi-disciplinary care.

Budget 2021 & 22

NFP Income Tax Exemptions

New compliance requirements for NFP income tax exemptions

The Government will invest $1.9m for the ATO to build an online system to enhance the transparency of income tax exemptions claimed by not-for-profit entities (NFPs).

It will be in action from 1 July 2023

Currently non-charitable NFPs can self-assess their eligibility for income tax exemptions, without an obligation to report to the ATO. The ATO will require income tax exempt NFPs with an active Australian Business Number (ABN) to submit online annual self-review forms with the information they ordinarily use to self-assess their eligibility for the exemption. This measure will ensure that only eligible NFPs are accessing income tax exemptions.

Budget 2021 & 22

Apprenticeship Scheme Uncapped

Apprenticeship scheme uncapped Apprenticeship is A system for training a new generation of practitioners of a trade or profession with on-the-job training and often some accompanying study Boosting Apprenticeship Commencements provides a 50% wage subsidy to employers and Group and Training Organisations to take on new apprentices and trainees. The measure will uncap the number of eligible places and increase the duration of the 50% wage subsidy to 12 months from the date an apprentice or trainee commences with their employer. From 5 October 2020 to 31 March 2022, businesses of any size can claim the Boosting Apprenticeship Commencements wage subsidy for new apprentices or trainees who commence during this period. Eligible businesses will be reimbursed up to 50% of an apprentice or trainee’s wages of up to $7,000 per quarter for 12 months.
Budget 2021 & 22

Early engagement process for foreign businesses

Date of effect1 July 2021
  • The ATO will introduce a new early engagement service specifically aimed at foreign businesses that are looking to invest in Australia.
  • The service aims to provide confidence to foreign investors on how the Australian tax laws will apply and will be tailored to specific investors.
  • It is envisaged that the ATO’s service will accommodate specific project timeframes and provide access to expedited private rulings.
  • Categories
    Budget 2021 & 22

    New avenue for small business to ‘pause’ ATO debt recovery

    Date of effectDate of Royal Assent of the enabling legislation

    Small businesses with an aggregated turnover of less than $10 million per year will be able to apply to the Small Business Taxation Division of the Administrative Appeals Tribunal (AAT) to pause or modify ATO debt recovery action until their underlying case is decided.

    Currently, small business can only pause ATO debt recovery action in the courts. This new avenue will enable a small business to pause ATO debt recovery until their case has been heard by the AAT.

    Budget 2021 & 22

    Tax exemption for storm and flood grants for SMEs and primary producers

    Date of effectGrants relating to storm and flood events between 19 February and 31 March 2021

    Qualifying grants made to primary producers and small businesses affected by the storms and floods will be non-assessable non-exempt income for tax purposes.

    Qualifying grants are Category D grants provided under the Disaster Recovery Funding Arrangements 2018, where those grants relate to the storms and floods in Australia that occurred due to rainfall events between 19 February 2021 and 31 March 2021. These include small business recovery grants of up to $50,000 and primary producer recovery grants of up to $75,000.

    A range of Government fees and regulatory charges have also been either revised or postponed.

    Budget 2021 & 22

    $450 per month threshold for super guarantee eligibility removed

    What is Superannuation Guarantee? The superannuation guarantee, or SG, dictates the minimum percentage of your earnings your employer needs to pay into your super fund. This percentage is controlled and legislated by the Australian Government.
    Date of effectThe first financial year after Royal Assent of the enabling legislation Expected to be 1 July 2022

    Currently, employees need to earn $450 per month to be eligible to be paid the superannuation guarantee. This threshold will be removed so all employees will be paid super guarantee regardless of their income earned.

    The Retirement Income Review estimated that around 300,000 individuals would receive additional superannuation guarantee payments each month once the threshold is removed.

    Budget 2021 & 22

    Residency tests rewrite

    Determining whether an individual is a resident of Australia for tax purposes can be complex. The current residency tests for tax purposes can create uncertainty and are often subject to legal action.
    Date of effectThe first income year after the date of Royal Assent of the enabling legislation.

    The Government will replace the individual tax residency rules with a new, modernised framework. The primary test will be a simple ‘bright line’ test – a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident. Individuals who do not meet the primary test will be subject to secondary tests that depend on a combination of physical presence and measurable, objective criteria.

    The modernisation of the residency framework is based on the Board of Taxation’s 2019 report Reforming individual tax residency rules – a model for modernisation.

    Budget 2021 & 22

    Temporary loss-carry back extension

    What is loss carry back? Loss carry back provides a refundable tax offset. Refundable tax offsets can reduce the amount of tax you are liable to pay to zero, which may result in a refundable amount. The amount of tax offset may be affected by your net exempt income, income tax liabilities and the surplus in your franking account. For loss carry-backs – The extension will allow eligible companies to carry back tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 income year.
    Date of effectLosses from the 2019-20, 2020-21, 2021-22 or 2022-23 income years

    Companies with an aggregated turnover of less than $5 billion will be able to carry back losses from the 2019-20, 2020-21, 2021-22 and 2022-23 income years to offset previously taxed profits in the 2018-19, 2019-20, 2020-21 and 2021-22 income years.

    The tax refund will be available on election by eligible businesses when they lodge their 2020-21, 2021-22 and 2022-23 tax returns.

    Before the measure was introduced in the 2020-21 Budget, companies were required to carry losses forward to offset profits in future years. Companies that do not elect to carry back losses can still carry losses forward as normal.