Federal Budget 2021 Snapshot

The Treasurer delivered the Federal Budget this week revealing the Government’s economic plan to secure Australia’s recovery. The Government aims to create jobs, guarantee essential services and build a more resilient and secure Australia by the means of Personal income tax cuts, business tax incentives, new apprenticeships and training places, more infrastructure and record funding for schools, hospitals, aged care, mental health and the NDIS. Some of the key highlights that might be relevant to you are listed below:

For Individuals

  1. Personal Tax Rates:

While no changes were made to the personal tax rates, the Government continues its Personal Income Tax Plan by announcing a number of measures targeted to provide immediate relief to individuals. The personal tax rates remain as previously announced for the 2020-21 year as follows:

0 to $18,200                      Nil

$18,201 to $45,000         19 cents for each $1 over $18,200

$45,001 to $120,000       $5,092 plus 32.5 cents for each $1 over $45,000

$120,001 to $180,000     $29,467 plus 37 cents for each $1 over $120,000

$180,001 and over          $51,667 plus 45 cents for each $1 over $180,000

  1. Extension of the Low and Middle Income Tax Offset (LMITO)

The LMITO was extended for a further year to the 2021-22 income year. The LMITO provides a reduction in tax of up to $1,080 and will be received on assessment after individuals lodge their tax return. Taxpayers with a taxable income of:

  • $37,000 or less will benefit by up to $255 in reduced tax
  • between taxable incomes of $37,000 and $48,000, the value of the offset increases at a rate of 7.5 cents per dollar to the maximum offset of $1,080
  • between $48,000 and $90,000 are eligible for the maximum offset of $1,080
  • between $90,000 to $126,000, the offset phases out at a rate of 3 cents per dollar.
  1. Increasing the Medicare levy low-income thresholds as follows:

Singles – $22,801 to $23,226

Families – $36,056 to $36,705

Seniors and pensioners – $36,056 to $36,705

Family threshold for seniors and pensioners – $50,191 to $51,094

  1. Changes to Individual Tax Residency rules

The current tests for the individual tax residency will be replaced 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.

  1. Self-education

The $250 reduction in the amount that can be deducted in relation to self-education expense to be removed.

  1. Employee Share Schemes – cessation of employment no longer a taxing point

Cessation of employment as a taxing point for the tax-deferred employee share schemes will be removed.

  1. First Home Super Saver Scheme changes

The maximum releasable amount of voluntary concessional and non-concessional contributions has been increased from $30,000 to $50,000.

  1. Superannuation Measures
  • Super contributions work test will be repealed from 1 July 2022 for voluntary non-concessional and salary sacrificed contributions for those under age 75 but the test will still apply for those aged 67-74.
  • Self-Managed Super Fund Residency rules will be relaxed by extending the central management and control test safe harbour from 2 to 5 years and removing the active member test for both SMSFs and small APRA funds.
  • Individuals with Legacy Retirement Products including Market Linked Pensions will be allowed to exit within a two-year window from the first financial year after the date of Royal Assent.
  • Australians over the age of 60 will be allowed to make downsizer contributions.
  1. Child Care Subsidy Changes

The Child Care Subsidy for second and subsequent children to be increased to a maximum of 95%. It is also proposed to abolish the $10,560 annual subsidy caps for high income earners.


For Businesses

  1. Loss Carry-Back for companies

Companies with turnover up to $5 billion will be allowed to offset losses against previous profits on which tax has been paid, to generate a refund. Eligible companies can carry back tax losses from the 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in 2018-19 and subsequent income years. This will be extended to include the 2022-23 income year.

  1. Temporary Full Expensing Extension

The Government has announced a twelve-month extension to the temporary full expensing measures until 30 June 2023. This will allow eligible businesses with aggregated annual turnover of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30 pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023.

  1. Super Guarantee Contributions (SGC)

The proposed SGC rate increases to 10% from 1 July 2021 will go ahead as planned.

  1. Abolition of the $450 SGC threshold

The current $450 per month minimum threshold for Super Guarantee Contributions to be removed from 1 July 2022.

  1. AAT powers extension in relation to small business taxation decisions

The Administrative Appeals Tribunal (AAT) will be given the power to pause or modify ATO debt recovery action in relation to disputed small business debts under review by the AAT.

  1. Digital Economy Strategy

$1.2 billion Digital Economy Strategy has been introduced aimed at taking advantage of the accelerated digital transformation resulting from COVID-19. As part of this strategy, it has introduced a 30% refundable Digital Games Tax Offset to make Australia an attractive destination for digital talent.

  1. Intangible assets effective life self-assessment

This measure provides option to self-assess the effective lives of eligible intangibles giving businesses a greater ability to align the tax treatment with the actual economic benefits provided from the asset. The new rules will apply from 1 July 2023.


Please feel free to contact your trusted advisor at Vivid Partners should you have any questions about how these measures will affect you.

The team at Vivid Partners


08 6270 2876

Please note that the information provided above is general only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information provided above you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.