As the Federal Budget was handed down last night, the key message from our Government was that Australia is recovering strongly compared to most other countries during the COVID-19 pandemic. A key measure of this is that the unemployment rate is on track to hit 5% by mid-2022. Given where we were 12 months ago, this would be a remarkable result. 

The key policy initiatives aim to build on the success and resilience of the Australian economy during our fight against the pandemic.

The following is a summary of the key announcements that may impact your business, including news about personal tax offsets, small business concessions, Australia’s digital economy, and support for women’s economic security.

Small Businesses

Firstly, as a reminder, the base rate entity corporate tax rate will reduce to 26% for the 2020-2021 income year, and 25% for the 2021-2022 income year. However, the just-announced budget did have a few new mentions as follows:

  • The initial superannuation guarantee threshold of $450 per month will be removed to help improve coverage and boost retirement savings. This would have a significant impact for many women in the workforce.
  • Temporary full expensing of assets purchased by eligible businesses is being extended by an additional year to 30 June 2023.
  • The recently introduced loss carry-back measures have now also been extended by an additional year, meaning a loss made in 2022-2023 will also be able to offset profits made in preceding years.
  • The Government will remove the cessation of employment taxing point for tax-deferred employee share schemes (ESS) in an attempt to modernise tax treatment and make it easier for businesses to offer these schemes.
Research & Development

The latest budget did not mention any change or removal of the previously announced R&D amended package so we can presume the Government will still be offering a refundable R&D tax offset with a premium of 18.5% above the applicable corporate rate. For small businesses, this means a tax offset rate of 43.5%, unchanged from the current rate. 

There were also no further funding announcements around the Export Market Development Grant (EMDG) program. 

Digital Economy Strategy

Australia has goals of becoming a leader in the digital economy by 2030 with a $1.2 billion plan. The Government is investing over $100 million into the digital skills of Australians and an additional $124 million in funding towards artificial intelligence.

For all your gamers out there, the Government also supports the digital games development industry by providing a refundable tax offset of 30% to eligible game developers.

Individuals

The good news for individuals is that the Low and Middle Income Tax Offset (LMITO) of up to $1,080 will continue to be available for the 2021-2022 financial year. 

Also, for individuals nearing retirement age, the Government will remove the “work test” requirement for those aged between 67 to 74 wishing to make voluntary superannuation contributions.

The tax residency rules are becoming clearer with the 183 day measure becoming the ‘primary test’. This should reduce compliance costs over time and make things a lot clearer for taxpayers.

Other Key Policy Initiatives

There’s no doubt this budget has a markedly changed tone when it comes to women and families when compared to previous budgets handed down by this government. While the amounts in some cases fall short of what was recommended, it is definitely a step in the right direction. Some of the measures include: 

  • An additional $1.1 billion will be spent on women’s safety measures including $261m over two years to boost frontline family, domestic and sexual violence services.
  • $351.6m in funding for new health measures with a particular focus on women’s health initiatives. 
  • $1.7 billion over the next five years to cut the cost of childcare for families with multiple children. Expect to see changes to the rebate cap, and means testing in order to get more parents back into the workforce. 
  • A massive $17.7 billion over five years to deal with the findings of the Aged Care Royal Commission. 
  • An investment of over $3 billion for COVID-19 vaccine programs, testing, and treatment.
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