Tax relief for workers and businesses, higher superannuation payments and housing assistance for first home buyers are just some of the changes set to occur at the start of the new financial year on Thursday 1st July, as a number of measures from the 2021 federal budget come into effect.

Arguably the most significant change for Australians is the extension of the low-and middle income tax offset, an end-of-financial-year rebate of up to $1080 for singles and $2160 for couples. This change will impact close to 10.2 million people earning up to $90,000.

This payment was originally supposed to cease with the introduction of the government’s stage two tax cuts because it was effectively baked into the Coalition’s three-part package. However, the government announced in the budget that the offset would continue into the 2021-22 income year due to the perceptions that removing the offset would result in a tax increase in a possible election year.

The Treasury predicts that extending the offset will boost gross domestic product by about $4.5 billion in 2022-23, therefore generating an extra 20,000 jobs across Australia.

The other substantial change affecting all workers as of 1st July 2021 is the increase in the superannuation guarantee which rises up from 9.5 percent to 10 percent.

For the average Australian, this change means an extra $6.50 of their income will be put into super each week, making them about $19,000 better off in retirement as a result, according to figures provided by the Association of Superannuation Funds of Australia.

However, some workers paid on a “total package” basis, meaning their salaries are inclusive of super, could see their take-home pay drop in order to increase their super payments.

On Thursday 1st July the federal government launched an online comparison tool to encourage Australians to switch out of underperforming superannuation funds.

The introduction of the YourSuper tool will be accompanied by a suite of other changes, including an increase in the number of people eligible to join a self-managed super fund from four to six, an increase in both the before-tax and after-tax super contribution caps and an extension of the temporary halving of minimum drawdown rates for super.

The Federal Government has also introduced a number of new policies to help single parents and first home buyers get a foot in the property market will also come into effect this week.

One of these policies includes a measure which enables 10,000 single parents to buy their first home with deposits of just 2 per cent over the next four years in the new $300,000 Family Home Guarantee.

The federal government is also extending the New Home Guarantee, which enables deposits of 5 percent, to an additional 10,000 first home buyers.

Business Tax Incentives Introduced On 1st July 2021

On 1st July 2021, small and medium businesses with a turnover of less than $50 million will benefit from a cut in the corporate tax rate from 26 per cent to 25 percent. On top of this access to a suite of tax concessions that had only been available to companies with a turnover of less than $10 million will be broadened to include firms with a turnover of up to $50 million.

Small breweries and distillers across Australian will gain an additional $255 million in savings due to an increase in the excise relief cap the mechanism by which both beer and spirit production is taxed to $350,000 from $100,000.

Measures to make research and development expenditure more tax effective will also come into effect this week, including an increase in the R&D expenditure threshold from $100 million to $150 million a year and incentives for companies to commit a greater share of their spending to R&D.

Otherwise, the government’s temporary full expensing and temporary loss carry-back measures will also continue during this new financial year.

Temporary expensing allows businesses to deduct the full cost of eligible capital assets, while the loss carry-back measure allows companies with domestic turnovers capped at $5 billion to write off pandemic-induced losses against previous profits.

Both measures were originally slated to end in June 2022 but were extended to June 2023 in the federal budget.

The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800. 

The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)

Post Author: Craig Dangar

Leave a Reply