The 2021 Federal budget is a big spending budget designed to create jobs, stimulate business investment and build confidence following the first recession since 1990, thanks to the impact of the
Covid-19 pandemic. Due to space restrictions this month’s column is restricted to the implications of the budget measures for individuals.
Here is a brief summary of what’s in the budget for you:
Low and middle income taxpayers – can enjoy another year of the LAMITO tax offset of up to $1080 in addition to the Low Income Tax Offset (LITO). These offsets will apply to both your 2021 and 2022 tax returns.
Medicare levy low-income thresholds – will increase by varying amounts for singles, families, seniors and pensioners for the 2021 income year. For example, the threshold for singles increases by $425 to $23226 and for single seniors and pensioners by $649 to $36,705 before the Medicare levy of 2% applies.
Retirees – as from 1st July 2022, the age for accessing the downsizing super contribution strategy has been reduced from age 65 to age 60 which opens up the opportunity to sell your home and make a non-concessional contribution of up to $300,000 each into super if you are a couple or $300,000 if you are a single . For many couples and singles this opportunity could well enable you to retire up to five years earlier funded by equity otherwise locked up in your home until age 65.
Getting rid of the ‘work test’ for those who are in the 67 to 74 age range as from 1st July 2022 is another winner you will welcome as you will no longer need to satisfy the work test of working at least 40 hours in any 30 day period in the financial year in which you may wish to make concessional or non-concessional super contributions.
Both of these measures provide opportunities for those of you in the relevant age ranges that are underfunded for their retirement to top up their super fund subject to the concessional and non-concessional caps.
First Home Super Scheme (FHSS) – the amount a first home buyer may withdraw out of their super to fund the deposit required for their home loan has been increased from $30,000 to $50,000.
Only voluntary concessional and non-concessional contributions made by the applicant can be withdrawn so you can’t include employer super guarantee contributions or spouse contributions to your super fund. Voluntary contributions made from 1st July 2017 up to the existing limit of $15,000 per year will count towards the total amount able to be released.
To be eligible, a person must be 18 years or over, have not used the FHSS scheme before and have never owned real property in Australia. Withdrawals of eligible FHSS contributions and associated earnings are taxed at the individual’s marginal rate less a 30% tax offset which results in an effective tax saving on money channeled via super for a first home purchase. It is expected the amending legislation will have received Royal Assent by 1st July 2022.
Home guarantees for single parents and new homes – the new home guarantee is to be expanded for a second year to provide an additional 10,000 places in 2021-22. First home buyers seeking to build a new home or purchase a newly built home will be able to do so with a deposit as little as 5%.
The family home guarantee for single parents is to be established with 10,000 guarantees made available over 4 years to single parents with dependants, allowing them to purchase a home sooner with a deposit of as low as 2%. This guarantee applies to both first home buyers and previous owner occupiers who are Australian citizens with taxable incomes of no more than $125,000.
Removal of the $250 self-education expense reduction – currently individuals claiming a tax deduction for self-education expenses need to reduce their claim by the first $250. This reduction has been removed and is expected to apply from 1st July 2022 onwards.
Until the above changes are legislated and have received Royal Assent, commencement dates for implementation are expected dates but should not be regarded as certainties.
Disclaimer:
The content of this article is not intended to be used as professional advice and should not be used as such. Before making any decisions based upon the above content, It is advisable to contact your financial adviser or registered tax agent.
Brian Spurrell FCPA, CTA, Registered Tax Agent, is Director of Personalised Taxation & Accounting Services Pty Ltd. PO Box 143 Warrandyte 3113. Mobile: 0412 011 946
Email: bspurrell@ptasaccountants.com.au Web: www.ptasaccountants.com.au