Earlier this month (11 May), the Treasurer announced the 2021 budget, which is the Federal Governments plan for the next stage of Australia’s recovery.

To help you understand how the Budget 2021 may affect you in terms of your tax obligations, we have uploaded the Budget 2021 fact sheet -Tax to our downloads section of the website.

To summarise, the budget includes lower taxes for working Australian’s and business tax relief to create jobs.

Tax cuts for low-and middle-income earners

The Low and Middle Income Tax Offset (LMITO) has been extended for one year which means individuals within the specified income ranges will retain tax cuts. You may have read in our article about this last month that the LMITO was due to end on 30 June 2021, but following this announcement, it will now be extended until 30 June 2022. The Government has estimated that around 10.2 million individuals will benefit from retaining the offset in 2021-22, which is worth up to $1,080 for eligible individuals or $2,160 for dual income couples. This tax relief is part of your annual tax return, so if you are eligible you will receive it as a tax refund on assessment in the 21/22 financial year. Please note, it doesn’t just appear in your bank account.

Tax support for businesses extended

Two tax incentives for business have been extended by one year:

  • Temporary full expensing

In the last Budget, the Government provided a temporary tax incentive for over 99 per cent of businesses, to support new investment and increase business cash flow. The dates for this were from 6 October 2020 until 30 June 2022. This has now been extended until 30 June 2023. Businesses with a turnover up to $5 billion are able to deduct the full cost of eligible depreciable assets of any value in the year they are installed. The cost of improvements to existing eligible depreciable assets made during this period can also be fully deducted. Assets must be acquired from 7:30pm AEDT on 6 October 2020 and first used or installed for use by 30 June 2023 to be eligible.

  • Temporary loss carry-back

To help increase cashflow for business and for those that were profitable but are now suffering losses due to Covid-19, this incentive has been extended for one year. Companies with a turnover up to $5 billion can offset losses against previous profits on which tax has been paid, to generate a cash refund. Losses incurred up to 2022‑23 can be carried back against profits made in or after 2018‑19 income year. Eligible companies may elect to receive a tax refund when they lodge their 2020‑21 and 2021‑22 and now 2022-23 tax returns.

Other changes include:

  • The way Employee Share Schemes (ESS) are taxed
  • Increase rights of small business to pause the collection of disputed debts
  • Introduce a Digital Games Tax Offset (DGTO) to grow the games development industry
  • Tax relief for brewers and distillers
  • Introduction of a Patent Box which offers a concessional corporate tax rate for Australian medical and biotech patents
  • Reducing compliance costs for individuals claiming self-education expense deductions

Further information can be found on the Budget.gov.au website.

As always, if you have any questions, or concerns relating to your tax obligations, then please call us on 08 9240 7629 or email: admin@taxproaustralia.com.au

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