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WA State Budget 2021 – 2022

Posted on September 9, 2021 by Ashley Dawson

The McGowan Government has used its strong surplus position off the back of a booming resources sector to fund important projects and initiatives that will set up Western Australia’s long-term future.

The Pre-Election Financial Projections Statement forecast an estimated 2020-21 surplus of $3.1 billion. The surplus has now been revised up to $5.6 billion on the back of a stronger economy and increased revenue. 

This financial year, 2021-22, a $2.8 billion surplus is forecast, with strong surpluses expected to continue across the forward estimates. 

The State’s net debt is expected to fall for a third consecutive year in 2021-22 to $32.1 billion, more than $11 billion lower than the $43.7 billion projected under the last Liberal National Government.

As a result of the stronger budget position, the surplus will continue to be used to help fund the McGowan Government’s record infrastructure program and key service priorities. The Budget allocates spending to the following initiatives:

  • Health and mental health across the State – $1.9 billion
    • Funding more beds, doctors and nurses and easing pressure on EDs;
  • Funding the construction of a new Women and Babies Hospital – $1.8 billion
    • Works on the new hospital at the QEII medical precinct are expected to begin in 2023, creating more than 1,400 local construction jobs;
  • Additional support to respond to COVID-19 – $1 billion
    • Taking the State’s total investment to $9 billion, including equipping our frontline services, supporting businesses and households;
  • The new Social Housing Investment Fund – $750 million 
    • The single largest investment in the State’s history which, combined with other initiatives in the Budget, will deliver more than 1,900 additional homes to vulnerable Western Australians. This takes the total number of social housing dwellings to be delivered over the next four years to 3,300;
  • The establishment of a Climate Action Fund – $750 million
    • $350 million delivered for the expansion of the softwood plantation estate, $256 million for various renewable energy initiatives and $144 million of other climate-related initiatives;
  • The creation of a Digital Capability Fund – $500 million
    • Funds to ensure key agency service delivery keeps pace with public expectations and to protect against cyber security;
  • The new Westport Project – $400 million
    • Funding to be spent over four years for strategic land purchases required for the development of a new port in the Kwinana industrial area and the road corridor connecting to the future port;
  • Keeping household fees and charges low – $397 million
    • Delivering on the election commitment to keep household electricity and water charges tied to the rate of inflation and provide support to people most in need.  

In addition, $1.4 billion in 2021-22 revenue has been quarantined to help deliver WA’s next major water source. The funding will be used as a significant down payment for a new desalination plant, subject to a business case in a future Budget, with construction potentially beginning by 2024-25.

The 2021-22 Budget delivers record infrastructure investment of $30.7 billion, including investments in road and rail, hospitals and schools and community based infrastructure.

This includes a record $9.1 billion investment in regional projects, and regional WA will also share in the benefits from billions of dollars on State-wide infrastructure projects and programs.

For more information on the WA State Budget, visit https://www.ourstatebudget.wa.gov.au

2021–22 Federal Budget

Posted on May 12, 2021 by GeersSullivan

The Federal Treasurer, Mr Josh Frydenberg, handed down the 2021–22 Federal Budget at 7:30 pm (AEST) on 11 May 2021.

A stronger than expected economic recovery from the COVID-19 recession has resulted in a budget deficit of $161 billion, $52.7 billion lower than the government’s expected deficit. With the virus still a threat to the global and domestic economy, the Budget contains various measures to support businesses and individuals with job creation, incentives, tax relief and superannuation changes.

Existing tax reliefs, including the low and middle income tax offset, the temporary company loss carry back rules and the full expensing of depreciating assets will be extended for another 12 months. Other key changes include a modernised individual tax residency bright-line test, tax concessions for medical and biotechnology innovations and removal of the $450 threshold to be eligible for superannuation guarantee.

The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au.

The tax, superannuation and social security highlights are set out below.

Individuals

• The low and middle income tax offset, available to taxpayers earning less than $126,000 per year, will remain for the 2021–22 income year.

• Individual tax residency rules to be simplified under new framework.

• The current limitation for claiming a self-education expense, where the first $250 of the allowable deduction is denied, will be removed.

• CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2020–21 year announced.

• A full income tax exemption for pay and allowances of ADF personnel deployed to Operation Paladin from 1 July 2020.

• Funding to increase home ownership, support jobs in the residential construction sector and enhance housing data.

Companies and business

• Temporary full expensing of eligible assets will be extended by 12 months to 30 June 2023.

• The temporary loss carry back offset will be extended by one year to apply for 2022–23 income year losses.

• Extended powers for AAT to pause or modify ATO debt recovery action for small business taxation decisions.

• Superannuation guarantee exemption for employees earning less than $450 in a month will be removed.

• The cessation of employment taxing point will be removed for tax-deferred employee share schemes that are available for all companies.

• A refundable tax offset for investing in qualifying Australian games expenditure will be introduced from 1 July 2022.

• Taxpayers with certain intangible depreciating assets will be given the choice of using the statutory effective life or self-assessing the decline in value from 1 July 2023.

• Corporate income derived from Australian medical and biotechnology patents in income years starting on or after 1 July 2022 will be taxed at a concessional rate of 17%.

• Income tax exemption for qualifying grants made to primary producers and small businesses affected by the storms and floods in Australia.

• A new early engagement service will be implemented to assist foreign investors and give them confidence to invest in Australian businesses.

• The corporate collective investment vehicle tax and regulatory framework will be finalised with a revised start date of 1 July 2022.

• Technical amendments will be made to the taxation of financial arrangements rules which will include facilitating access to hedging rules on a portfolio hedging basis.

• The junior minerals exploration incentive which was due to end in 2020–21 will be extended 4 more years, from 1 July 2021 to 30 June 2025.

• A temporary levy will be imposed on offshore petroleum production to recover costs of decommissioning the Laminaria-Corallina oil fields and associated infrastructure.

• The heavy vehicle road user charge will be increased from 25.8 cents per litre to 26.4 cents per litre from 1 July 2021.

• The Boosting Apprenticeship Commencements wage subsidy will be expanded.

Not-for-profits

• From 1 July 2023 income tax exempt NFPs with an active ABN will be required to submit the information used to self-assess their eligibility for the exemption in an online annual self-review form.

• Australian Associated Press Ltd, Virtual War Memorial Limited and Scripture Union Queensland have been added to the list of specifically listed DGRs for a period beginning 1 July 2021.

• Cambridge Australia Scholarships Limited and Foundation 1901 Limited have had their DGR status extended by 5 years.

International tax

• Concessional tax treatment for offshore banking units will be removed.

• The list of jurisdictions that have an effective information sharing agreement with Australia will be updated.

• New Zealand will maintain its primary taxing right over members of its sporting teams and support staff located in Australia due to COVID-19.

Superannuation

• From 1 July 2022, individuals aged 67 to 74 will no longer be required to meet the work test when making or receiving non-concessional superannuation contributions or salary sacrificed contributions.

• From 1 July 2022, the eligibility age to make downsizer contributions into superannuation will be reduced from 65 to 60 years of age.

• The maximum amount of contributions that can be released from superannuation under the first home super saver scheme (FHSSS) will be increased from $30,000 to $50,000 from 1 July 2022.

• Technical amendments will be made to the first home super saver scheme (FHSSS) legislation to improve its operation and assist those who make errors in their FHSSS release applications.

• The central management and control safe harbour test for an SMSF to be considered an Australian superannuation fund will be extended from 2 years to 5 years. Also, the active member test will be removed.

• Pensioners with a market-linked, life expectancy or lifetime pension in their superannuation fund will be granted a 2-year window in which they can choose to commute the outstanding benefit plus any associated reserves into a contemporary superannuation pension.

• The government will not proceed with a measure to extend early release of superannuation to victims of family and domestic violence.

• The ATO will be given additional funding to administer the transfer of unclaimed superannuation money directly to KiwiSaver accounts.

Aged care and social security

• A total of $17.7 billion in funding will be provided for aged care initiatives in response to the Royal Commission on Aged Care Quality and Safety.

• Changes to the pension loans scheme to improve uptake include access to 2 advance payments (conditions apply), and the introduction of a “no negative equity guarantee”.

• The childcare subsidy will be increased up to a maximum of 95% from 1 July 2022.

• The base rate of several unemployment benefits will be increased by $50 per fortnight from 1 April 2021. Other eligibility conditions and waiting periods have also been relaxed.

Excise and import duties

• Excise relief for small brewers and distillers will be expanded.

• The automotive research and development tariff concession will be extended for 4 years until 30 June 2025.

• Australia’s anti-dumping regime will be reformed to make the system easier for businesses to navigate.

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Individuals

Low and middle income tax offset remains for 2021–22

The low and middle income tax offset (LMITO) will be extended for another year into 2021–22. The LMITO was due to be removed on 30 June 2021.

Consistent with the current income year, the low and middle income tax offset is calculated as follows:

Taxable incomeLow and middle income tax offset
Less than $37,000$255
Between $37,000 and $48,000Increase 7.5 cents per $1, capped at $1,080
Between $48,000 and $90,000$1,080
Between $90,000 and $126,000Reducing from maximum at 3 cents per $1
Above $126,000$0

Source: Budget Paper No 2, p 27.

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Individual tax residency rules simplified

The individual tax residency rules will be replaced by a new framework with a primary physical presence test.

Under the new primary test, a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident for tax purposes. Individuals who do not meet the primary test will be subject to secondary tests that consider a combination of physical presence and other measurable, objective criteria.

Currently, an individual who is physically present in Australia for 183 days or more in an income year will not be an Australian resident if their usual place of abode is overseas and they have no intention to take up residence in Australia. The new framework is based on recommendations made by the Board of Taxation in the 2019 report Reforming individual tax residency rules — a model for modernisation.

The measure will have effect from the 1 July following assent of the enabling legislation.

Source: Budget Paper No 2, p 21–22; Budget Fact Sheet “Tax incentives to support recovery”, p 8.

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$250 exclusion on self-education deductions to be removed

The current limitation for individuals claiming self-education expenses, where the first $250 of the deduction is denied, will be removed. The removal of the $250 exclusion for prescribed courses of education will make it easier for individuals to work out their allowable deductions in the years they incur these expenses.

The change will come into effect from the income year following the date of assent of the relevant legislation.

There is no change to the general provisions for claiming a self-education deduction, such as requiring the expense to come from a prescribed course of education.

Source: Budget Paper No 2, p 26.

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Medicare low-income thresholds for 2020–21

The CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2020–21 year of income have been announced. The new thresholds are:

 Medicare levy low income threshold (at or below which no Medicare levy payable) 2020–21 (2019–20)
Class of peopleSingleFamily
Individual$23,226 ($22,801)$39,167 ($38,474)
Senior Australians and eligible pensioners$36,705 ($36,056)$51,094 ($50,191)
Threshold increment for each additional dependent child/student$3,597 ($3,533)

Source: Budget Paper No 2, p 24.

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Full income tax exemption for ADF personnel deployed to Operation Paladin

A full income tax exemption will apply to pay and allowances of Australian Defence Force (ADF) personnel deployed to Operation Paladin from 1 July 2020. Operation Paladin includes ADF personnel deployed in Israel, Jordan, Syria, Lebanon and Egypt.

Source: Budget Paper No 2, p 24.

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Home ownership funding package

The government will provide $782.1 million over 4 years from 2021–22 to increase home ownership, support jobs in the residential construction sector and enhance housing data. Funding in this package includes:

  • • $774.8 million over 2 years from 2021–22 for the HomeBuilder program to extend the construction commencement requirement from 6 months to 18 months for all existing applicants
  • • establishing the Family Home Guarantee with 10,000 places from 2021–22 to support single parents with dependants to enter, or re-enter, the housing market with a deposit of 2%
  • • extending the first home loan deposit scheme to provide an additional 10,000 new home guarantees in 2021–22 to allow eligible first home buyers to build a new home or purchase a newly constructed home with a deposit of 5%
  • • $5.8 million over 3 years from 2021–22 to continue to support the Australian Housing and Urban Research Institute to deliver the National Housing and Urban Research Program
  • • $1.2 million over 4 years from 2021–22 for the Australian Institute of Health and Welfare to maintain and enhance the Housing Data Dashboard website, with costs partially offset by National Housing Finance and Investment Corporation research funding.

Source: Budget Paper No 2, pp 187 and 188.

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Companies and business

Extension to temporary full expensing

Temporary full expensing of eligible assets will be extended by 12 months to 30 June 2023.

Eligible businesses with aggregated turnover or income less than $5 billion will be able to deduct the full cost of eligible depreciating assets acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023. All other aspects of the temporary full expensing rules first introduced in the 2020–21 Budget will remain unchanged.

The temporary full expensing rules supersede the normal small business depreciation rules or depreciation under Div 40. Entities calculating depreciation under Div 40 can opt out on an asset-by-asset basis.

Normal depreciation arrangements will apply from 1 July 2023.

Source: Budget Paper No 2, p 29; Budget Fact Sheet “Tax incentives to support the recovery”, p 2.

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Extension to temporary loss carry back offset

The temporary loss carry back offset will be extended by one year to apply for 2022–23 income year losses.

Eligible corporate tax entities with aggregated turnover less than $5 billion will be able to carry back losses from the 2022–23 income year to offset previously taxed profits made in or after the 2018–19 income year. The loss that can be carried back is limited by the amount of earlier taxed profits and cannot generate a franking account deficit.

Eligible companies can elect to carry back losses under this measure for any or all of the 2019–20 to 2022–23 income years.

Source: Budget Paper No 2, p 30, Budget Fact Sheet “Tax incentives to support the recovery”, p 2.

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Extended powers for AAT to pause or modify ATO debt recovery

Small businesses will be able to apply to the AAT to pause or modify ATO debt recovery actions for debts being disputed in the AAT.

The Small Business Taxation Division of the Administrative Appeals Tribunal (AAT) will be allowed to pause or modify any ATO debt recovery actions, such as garnishee notices and the recovery of general interest charges or related penalties, until the underlying dispute is resolved by the AAT. The AAT will be required to ensure applications are in relation to genuine disputes and to consider the potential effect of an application on the integrity of the tax system.

The measure will apply to small business entities (including individuals carrying on a business) with an aggregated turnover of less than $10 million per year that have filed an application in relation to tax matters before the Small Business Taxation Division of the AAT.

These new powers for the AAT will be available in respect of proceedings commenced on or after the date of assent of the legislation.

Source: Budget Paper No 2, p 19; Treasurer, Minister for Employment, Workforce, Skills, Small and Family Business and Assistant Treasurer’s press release “Making it easier for small business to pause debt recovery action”, 8 May 2021.

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Removing the $450 per month superannuation guarantee threshold

The employer exemption from superannuation guarantee payments for individuals earning less than $450 in salary or wages in a calendar month will be removed.

The measure will take effect from the 1 July following legislation receiving assent. The government expects to have removed this exemption category before 1 July 2022.

Source: Budget Paper No 2, p 26.

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Tax-deferred employee share schemes — ceasing employment no longer a taxing point

The cessation of employment taxing point will be removed for tax-deferred employee share schemes (ESS) that are available for all companies. The change will apply to ESS interests issued from the first income year after assent of the amending legislation.

Under existing rules for a tax-deferred ESS, where certain criteria are met employees may defer tax until a later tax year (known as the deferred taxing point). By removing the cessation of employment taxing point, the deferred taxing point will be the earliest of:

  • • in the case of shares, when there is no risk of forfeiture and no restrictions on disposal
  • • in the case of options, when the employee exercises the option and there is no risk of forfeiting the resulting share and no restriction on disposal, and
  • • the maximum period of deferral of 15 years.

The following regulatory changes will also be made for ESS where employers do not charge or lend to employees under the ESS:

  • • disclosure requirements will be removed and the offer will be exempted from licensing, anti-hawking and advertising prohibitions, and
  • • for shares in an unlisted company, the maximum value of shares that can be issued to an employee with the simplified disclosure requirements and above exemptions will be increased from $5,000 to $30,000 per employee per year (no such value cap exists for listed companies).

The regulatory changes will apply 3 months after assent of the amending legislation.

Source: Budget Paper No 2, p 16; Budget Fact Sheet “Tax incentives to support the recovery — Supporting households, driving business investment, and creating jobs”.

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Digital games tax offset to be introduced to promote growth of gaming industry

A digital games tax offset will be introduced to promote the growth of the digital games industry in Australia. This will be a refundable tax offset for a minimum investment of $500,000 from 1 July 2022 in “qualifying Australian games expenditure”.

The criteria and definition of qualifying expenditure will be determined following industry consultation. However, games with gambling elements will be excluded.

Source: Budget Paper No 2, pp 72–73; Budget Fact Sheet “Tax incentives to support the recovery — Supporting households, driving business investment, and creating jobs”.

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Self-assessment of intangible depreciating assets to be allowed

Taxpayers who purchase patents, registered designs, copyrights or in-house software will be given the opportunity to self-assess their effective life for decline in value. The measure comes into effect for specified intangible assets acquired after 1 July 2023.

These assets are currently set to statutory effective life calculations. Where the taxpayer cannot reasonably estimate an effective useful life, or otherwise chooses not to self-assess, they may continue to use the statutory depreciation rates.

Source: Budget Paper No 2, p 14.

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Concessional taxation of corporate income derived from certain patents

Corporate income derived from Australian medical and biotechnology patents in income years starting on or after 1 July 2022 will be taxed at a concessional effective tax rate of 17%. The mechanism by which this “patent box” concession will be delivered is subject to consultation with industry. The government intends to extend consultation in relation to the patent box with a view to determining its appropriateness for supporting the clean energy sector.

Currently, income the subject of the proposed patent box concession is undifferentiated in the income of a corporate taxpayer and accordingly subject to the rate applicable to the taxpayer, namely 25% for businesses with aggregated turnover of less than $50 million, otherwise 30%.

The patent box measure builds on the JobMaker Research and Development Tax Incentive announced in the 2020–21 Budget, by offering a competitive tax rate for profits generated from Australian owned and developed patents.

Source: Budget Paper No 2, p 23.

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2021 storms and floods — income tax exemption for qualifying grants

An income tax exemption will be provided for qualifying grants made to primary producers and small businesses affected by the storms and floods in Australia.

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. The grants will be made non-assessable non-exempt income for tax purposes.

Source: Budget Paper No 2, p 12.

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ATO early engagement service for foreign investors

From 1 July 2021, a new early engagement service will be implemented to assist foreign investors and give them confidence to invest in Australian businesses. The service will:

  • • provide information to investors about how Australian tax laws will apply, as well as federal tax obligations
  • • be tailored to the particular needs of each investor
  • • be specific in relation to project timeframes
  • • integrate tax aspects of the foreign investment review board approval process, as well as assist in the time sensitive aspects of an investment transaction, and
  • • facilitate access to an expedited private binding rulings and advance pricing agreements where necessary.

Source: Budget Fact Sheet “Tax incentives to support the recovery — Supporting households, driving business investment, and creating jobs”.

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Corporate collective investment vehicle framework revised start date

The corporate collective investment vehicles (CCIV) component of the Ten Year Enterprise Tax Plan — implementing a new suite of collective investment vehicles measure announced in the 2016–17 Budget will be finalised with a revised commencement date of 1 July 2022. The measure proposed introducing a tax and regulatory framework for CCIVs.

Source: Budget Paper No 2, p 13.

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Taxation of financial arrangements — hedging and foreign exchange deregulation

Technical amendments will be made to the taxation of financial arrangements (TOFA) rules which will include facilitating access to hedging rules on a portfolio hedging basis.

The amendments aim to reduce compliance costs and correct unintended outcomes, so that taxpayers are not subject to taxation on unrealised foreign exchange gains and losses unless this is elected.

These changes will apply for relevant transactions entered into on or after 1 July 2022.

Source: Budget Paper No 2, p 29.

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Junior minerals exploration incentive extended 4 more years

The junior minerals exploration incentive (JMEI) which was due to end in 2020–21 will be extended 4 more years, from 1 July 2021 to 30 June 2025.

The JMEI is a tax credit arrangement that allows junior mineral exploration companies to pass future tax deductions (losses) to Australian resident investors for greenfields mineral exploration in Australia. Minor legislative amendments will also be made to allow unused exploration credits to be redistributed a year earlier than under current settings.

Source: Budget Paper No 2, p 141; Treasurer and Minister for Resources, Water and Northern Australia’s media release “Junior miners get $100 million funding boost”, 5 May 2021.

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Temporary levy on offshore petroleum production

A temporary levy will be imposed on offshore petroleum production to recover costs of decommissioning the Laminaria-Corallina oil fields and associated infrastructure. The levy will terminate on 30 June in the year in which all associated decommissioning costs have been recovered. The government will consult with industry on the proposed levy.

Source: Budget Paper No 2, p 14.

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Fuel tax credits — heavy vehicle road user charge increased

The heavy vehicle road user charge will be increased from 25.8 cents per litre to 26.4 cents per litre from 1 July 2021. The charge is applied to reduce the fuel tax credit rate per litre available for vehicles with a GVM greater than 4.5 tonnes.

The increase was agreed by Commonwealth and State and Territory Transport Ministers to contribute to the construction and maintenance of roads.

Source: Budget Paper No 2, p 150.

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Apprenticeship wage subsidy expanded

The Boosting Apprenticeship Commencements wage subsidy will be expanded to support businesses and Group Training Organisations that take on new apprentices and trainees.

This measure will uncap the number of eligible places (currently capped at 100,000 places). The duration of the 50% wage subsidy will be increased to 12 months from the date an apprentice or trainee commences with their employer. The subsidy will now be available from 5 October 2020 to 31 March 2022 and businesses of any size can claim the 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.

Source: Budget Paper No 2, p 88.

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Not-for-profits

Accessing income tax exemptions by not-for-profits

From 1 July 2023 non-charitable not-for-profits (NFPs) with active ABNs will be required to submit the information used to self-assess their eligibility for income tax exemptions in an online self-review form. This will be an annual requirement.

Currently non-charitable NFPs self-assess their eligibility for income tax exemptions, but there is no obligation to report to the ATO.

The ATO will be provided with $1.9 million capital funding to build an online system to support the measure.

Source: Budget Paper No 2, p 22.

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Additions to deductible gift recipients list

The following organisations have been approved as specifically listed deductible gift recipients (DGRs) as follows:

  • • Australian Associated Press Ltd from 1 July 2021 to 30 June 2026
  • • Virtual War Memorial Limited from 1 July 2021 to 30 June 2026
  • • Scripture Union Queensland from 1 July 2021 to 30 June 2023

In addition, the following organisations have been approved for extension of their DGR status as follows:

  • • Cambridge Australia Scholarships Limited from 1 July 2021 to 30 June 2026
  • • Foundation 1901 Limited from 1 September 2021 to 31 August 2026

East African Fund Limited is currently operating as the School of St Jude Limited which is a public benevolent institution endorsed by the ATO as a DGR under a general DGR category. At the request of the organisation, it will be removed as a specifically listed DGR.

Gifts from $2 made to DGRs are tax deductible.

Source: Budget Paper No 2, p 25.

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International tax

Changes to offshore banking unit regime

Concessional tax treatment for offshore banking units (OBUs) will be removed.

The concessional 10% effective tax rate applying to income derived from eligible offshore banking activities will be removed. Existing OBUs will have access to the concessional tax rate until the end of the 2022–23 income year. The withholding tax exemption for interest and gold fees paid by OBUs on certain offshore borrowings will be removed from 1 January 2024. The OBU regime will also be closed to new entrants from 26 October 2018.

These changes to the OBU regime have been introduced by the Treasury Laws Amendment (2021 Measures No 2) Bill 2021.

The government will consult on alternative measures to support the industry and ensure activity remains in Australia.

Source: Budget Paper No 2, p 20–21; Treasurer’s press release “Amending Australia’s Offshore Banking Unit Regime”, 12 March 2021.

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List of exchange of information jurisdictions to be updated

The list of jurisdictions that have an effective information sharing agreement with Australia will be updated.

The following countries will be added to the existing jurisdictions: Armenia, Cabo Verde, Kenya, Mongolia, Montenegro and Oman.

Residents of listed jurisdictions will be eligible to access the reduced managed investment trust withholding rate of 15% on certain distributions, instead of the default rate of 30%.

The updated list will be effective from 1 January 2022.

Source: Budget Paper No 2, p 21.

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NZ to maintain primary taxing right over sporting teams and support staff in Australia

The government has announced that it will ensure New Zealand maintains its primary taxing right over members of its sporting teams and support staff in respect of Australian income tax and fringe benefits tax liabilities that arise from exceeding the 183-day test in the Australia–New Zealand double tax agreement as a result of being located in Australia for league competitions because of COVID-19.

The measure will apply to the 2020–21 and 2021–22 income and fringe benefits tax years.

Source: Budget Paper No 2, pp 13 and 14.

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Superannuation

Work test for superannuation contributions to be abolished

From 1 July 2022, individuals aged 67 to 74 will no longer be required to meet the work test when making or receiving non-concessional superannuation contributions or salary sacrificed contributions.

These individuals will also be able to access the non-concessional bring-forward arrangement, subject to meeting the relevant eligibility criteria.

The existing $1.6 million cap on lifetime superannuation contributions will continue to apply (increasing to $1.7 million from 1 July 2021). The annual concessional and non-concessional caps will also continue to apply.

Access to concessional personal deductible contributions for individuals aged 67 to 74 will still be subject to meeting the work test.

Source: Budget Paper No 2, p 19; Budget Fact Sheet “Superannuation”, p 1.

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Eligible age for downsizer contributions lowered to 60 years

From 1 July 2022, the eligibility age to make downsizer contributions into superannuation will be reduced from 65 to 60 years of age.

The downsizer contribution will allow individuals to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person (or $600,000 per couple) from the proceeds of selling their home, provided that the home has been held for at least 10 years. Both members of a couple can contribute in respect of the same home, and contributions do not count towards non-concessional contribution caps.

Individuals with balances over the transfer balance cap ($1.7 million from 1 July 2021) are also able to make a downsizer contribution, however the downsizer amount will count towards that cap when savings are converted to the retirement phase.

Source: Budget Paper No 2, p 18; Budget Fact Sheet “Superannuation”, p 3

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Maximum releasable amount under first home super saver scheme increased to $50,000

The maximum amount of contributions that can be released from superannuation under the first home super saver scheme (FHSSS) will be increased from $30,000 to $50,000.

The FHSSS applies to voluntary contributions made into superannuation on or after 1 July 2017. Voluntary contributions made from that date will count towards the total amount able to be released.

Source: Budget Paper No 2, p 17.

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First home super saver scheme — technical amendments

The government will make 4 technical changes to the first home super saver scheme (FHSSS) legislation to improve its operation and assist FHSSS applicants who make errors on their release applications by:

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  • • increasing the discretion of the Commissioner of Taxation to amend and revoke FHSSS applications
  • • allowing individuals to withdraw or amend their applications prior to receiving an FHSSS amount, and allowing those who withdraw to re-apply for FHSSS releases in the future
  • • allowing the Commissioner of Taxation to return any released FHSSS money to superannuation funds, provided that the money has not yet been released to the individual
  • • clarifying that the money returned by the Commissioner of Taxation to superannuation funds is treated as funds’ non-assessable non-exempt income and does not count towards the individual’s contribution caps.

Source: Budget Paper No 2, pp 17–18.

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Central management and control safe harbour test extended for SMSFs

Currently, an SMSF will remain an Australian superannuation fund where the members/trustees of the SMSF are overseas temporarily for a period not exceeding 2 years. The government has announced a proposal to extend this safe harbour test to 5 years.

This extension will allow an individual who is overseas to continue active control of their SMSF, as opposed to appointing a legal personal representative as the trustee of the SMSF under an enduring power of attorney.

Also, the government intends to remove the active member test when determining whether an Australian superannuation fund is a complying fund. Currently, at least 50% of the total market value of an SMSF or small APRA fund is required to be held on behalf of active members who are Australian residents.

The new safe harbour test will be in effect on the 1 July following assent of the enabling legislation. The government has announced in the budget that it expects the enactment of legislation to be prior to 1 July 2022.

Source: Budget Paper No 2, p 28.

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SMSF legacy pensions to be allowed conversion

A 2-year window will be created in which a member of an SMSF with a market-linked, life expectancy or lifetime pension can convert their pension into an account-based pension.

When reasonable benefits limits were abolished on 1 July 2007, these types of existing pensions could not be commuted into a new account-based pension except in very limited circumstances.

On conversion, a pensioner may have amounts allocated to their account-based pension from a reserve account. In this instance, the commuted reserve will be taxed in the fund as an assessable contribution. The assessable contribution will not count towards the individual’s concessional contributions cap and will not trigger excess contributions.

The government has announced that there will be no grandfathering of social security treatments on conversion of a legacy pension account. Importantly, it will not be compulsory for individuals to convert these products.

The 2-year window will commence from the first financial year following assent of the enabling legislation. However, the conversion will not be available for pensioners with a flexi-pension product, or a lifetime defined benefit product with an APRA-regulated or public sector fund.

Source: Budget Paper No 2, p 27; Budget Fact Sheet “Superannuation — More flexibility for older Australians”.

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No early release of super for victims of family and domestic violence

The government will not proceed with a measure to extend early release of superannuation to victims of family and domestic violence.

Under the proposed measure, victims of family and domestic violence would have been able to withdraw up to $10,000 from their superannuation on compassionate grounds.

Source: Budget Paper No 2, p 15.

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Transfer of superannuation to KiwiSaver accounts

The ATO will be given an additional $11 million over 4 years from 2021–22 to administer the transfer of unclaimed superannuation money directly to KiwiSaver accounts (the New Zealand equivalent of Australian superannuation funds).

From 11 December 2021 the ATO may, if directed by a person for whom unclaimed money is held, pay amounts directly to a KiwiSaver scheme provider. Prior to this date, retirement savings can only be transferred between Australian complying superannuation funds (other than SMSFs) and New Zealand KiwiSaver schemes.

Source: Budget Paper No 2, p 193.

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Aged care and social security

Increased funding for aged care

A total of $17.7 billion in funding will be provided for aged care initiatives in response to the Royal Commission on Aged Care Quality and Safety.

Key measures include:

  • Home care measures:
  •  
  • – $6.5 billion over 4 years to release 80,000 additional home care packages over 2 years from 2021–22. This will bring the total number of home care packages to 275,598 by June 2023
  • – $798.3 million to provide greater access to respite care services and payments to support carers
  • – $272.5 million over 4 years to support senior Australians to access information about aged care, navigate the aged care system and connect to services through the introduction of dedicated face-to-face services
  • – $28.5 million in 2021–22 to ensure the continued operation of My Aged Care.
  • Residential care measures:
  •  
  • – $365.7 million to improve access to primary care and other health services in residential aged care, and additional investment in digital and face-to-face assistance to make it easier to navigate the aged care system
  • – $200.1 million to introduce a new star rating system to provide senior Australians, their families and carers with information to make comparisons on quality and safety performance of aged care providers
  • – $3.9 billion over 4 years from 2021–22 to increase the amount of front line care (care minutes) delivered to 240,000 aged care residents and 67,000 who access respite services, by 1 October 2023. This will be mandated at 200 minutes per day, including 40 minutes with a registered nurse
  • – $3.2 billion to support aged care providers to deliver better care and services through a new government-funded basic daily fee supplement of $10 per resident per day, while continuing the 30% increase in the homelessness and viability supplements
  • – $189.3 million over 4 years from 2020–21 to implement the new funding model, the Australian National Aged Care Classification (AN-ACC)
  • – $49.1 million for the current independent hospital pricing authority to help ensure that aged care funding is directly related to the cost of care.

There will also be funding allocated to increase the aged care workforce and improve access to aged care services for individuals in regional and remote areas.

Source: Budget Paper No 2, pp 99–103.

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Changes to the pension loans scheme

The following changes to the pension loans scheme are intended to improve uptake:

  • • participants in the scheme will be allowed to access up to 2 lump sum advances in any 12 month period, up to a total value of 50% of the maximum annual rate of the age pension
  • • a “no negative equity guarantee” will be introduced so borrowers will not have to repay more than the market value of their property.

Source: Budget Paper No 2, p 182.

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Childcare subsidy to increase

The childcare subsidy will be increased up to a maximum of 95% from 1 July 2022.

Under the current arrangements the maximum childcare subsidy payable is 85% of childcare fees. For families with more than one child in childcare, the level of subsidy received will increase by 30% to a maximum subsidy of 95% of fees paid for their second and subsequent children.

From 1 July 2022, the annual $10,560 cap on childcare fee rebates will also be abolished. Currently families with combined incomes above $189,390 are subject to a childcare subsidy cap of $10,560 per child per year.

The government estimates that, under these changes:

  • • a family earning $110,000 a year will have the subsidy for their second child increase from 72% to 95%, and they would also be $95 per week better off for 4 days of care
  • • a family earning $80,000, with 3 children, will have the subsidy increase from 82% to 95% for their second and third children and would also be $108 per week better off for 4 days of care.

Source: Budget Paper No 2, p 81; Treasurer’s media release “Making childcare more affordable and boosting workforce participation”, 2 May 2021.

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Unemployment benefits to increase

The base rate of certain benefits will increase by $50 per fortnight from 1 April 2021. This increase applies to JobSeeker Payment, Youth Allowance, Parenting Payment, Austudy, ABSTUDY Living Allowance, Partner Allowance, Widow Allowance, Special Benefit, Farm Household Allowance and for certain Education Allowance recipients under the Department of Veterans’ Affairs Education Scheme.

Other changes include:

  • • The income-free area of certain benefits will increase to $150 per fortnight from 1 April 2021. This applies to JobSeeker Payment, Youth Allowance, Parenting Payment Partnered, Widow Allowance and Partner Allowance.
  • • The temporary waiver of the Ordinary Waiting Period for certain payments will be extended for a further 3 months to 30 June 2021.
  • • The expanded eligibility criteria for the JobSeeker Payment and Youth Allowance will be extended for a further 3 months to 30 June 2021 for those required to self-isolate or care for others as a result of COVID-19.
  • • The $2,000 relocation assistance payment will be paid upfront, with eligibility expanded to enable job seekers to access the incentive when they take up ongoing work of more than 20 hours per week.

Source: Budget Paper No 2, p 181.

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Excise and import duties

Excise relief for small distillers and brewers

From 1 July 2021, eligible brewers and distillers will be able to receive a full remission of any excise they pay, up to an annual cap of $350,000. Currently, eligible brewers and distillers are entitled to a refund of 60% of the excise they pay, up to an annual cap of $100,000.

This will align the benefit available under the excise refund scheme for brewers and distillers with the wine equalisation tax producer rebate.

Source: Budget Paper No 2, p 12; Treasurer and Assistant Treasurer’s media release “Tax relief for small brewers and distillers to support jobs”, 1 May 2021.

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Import duties — automotive R&D tariff concession extended

The automotive research and development tariff concession will be extended for a further four years until 30 June 2025, effective from 1 April 2021.

Companies that are registered under the Automotive Transformation Scheme Act 2009 as at 31 December 2020 will continue to be able to claim a tariff concession of up to 5% on the value of imports used for automotive R&D in Australia.

Source: Budget Paper No 2, p 9.

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Import duties — anti-dumping reforms

Australia’s anti-dumping regime will be reformed to make the system easier for businesses to navigate:

  • • The Anti-Dumping Commission will be given additional funding to provide importers and local manufacturers with advice on whether goods are subject to anti-dumping duties.
  • • There will be increased flexibility to apply different rates of duties for particular variants of imported goods.
  • • Funding will also be provided to support the International Trade Remedies Advisory Service, to assist small and medium enterprises with the anti-dumping merits review process.

Eligible importers will also be allowed to claim a tariff concession order based exemption from anti-dumping duties at the time they make their import declaration.

Source: Budget Paper No 2, p 136.

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