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What do we have in this year’s Federal Budget for all our tax and super practitioners?

First, we have the announcements that we are keeping what we already have for a bit longer…

Retaining the low and middle income tax offset for the 2021-22 income year 

The Government will retain the $1,080 low and middle income tax offset for the 2022 year. 

Taxpayers with taxable incomes between $48,000 and $90,000 are eligible for the maximum offset of $1,080. For taxable incomes of $90,000 to $126,000, the offset phases out at a rate of 3 cents per dollar. 

Temporary full expensing extension 

The Government will extend the full expensing of capital asset rules announced in October for 12 months until 30 June 2023. 

Temporary loss carry-back extension 

The Government extend the loss carry-back announce in October last year. This will allow companies to carry back tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 income year. 

Increasing the Medicare levy low-income thresholds 

The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from 1 July 2020 to take account of recent movements in the CPI so that low-income taxpayers generally continue to be exempt from paying the Medicare levy. 

Second, the Budget provides us with a series of good changes, but not good enough to staying up late on a Tuesday night reading budget papers. These changes will start when the legislation is passed.

Removing the $250 self-education expense exclusion 

The Government will remove the exclusion of the first $250 of deductions for self-education. 

Modernising the individual tax residency rules 

The Government will replace the individual tax residency rules with a simple ‘bright line’ test — a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident. Individuals who do not meet the primary test will be subject to secondary tests that depend on a combination of physical presence and measurable, objective criteria. 

Self-assessing the effective life of intangible depreciating assets

The Government will allow taxpayers to self-assess the tax effective lives of eligible intangible depreciating assets, such as patents, registered designs, copyrights and in- house software. This measure will apply to assets acquired from 1 July 2023, after the temporary full expensing regime has concluded

Employee Share Schemes — removing cessation of employment as a taxing point

The Government will remove the cessation of employment taxing point for the tax-deferred Employee Share Schemes. 

Increased powers for the Administrative Appeals Tribunal in relation to small business taxation decisions 

Small business entities that file an application in relation to tax matters before the SBTD of the AAT on or after the commencement date will be able to apply for a pause or modification of the Commissioner’s debt recovery actions, until the underlying dispute has been decided by the AAT. 

Patent Box concession for Australian medical and biotechnology innovations 

The Government will introduce a “patent box” tax regime to further encourage innovation in Australia by taxing corporate income derived from patents at a concessional effective corporate tax rate of 17 per cent, with the concession applying from income years starting on or after 1 July 2022. 

The patent box will apply to income derived from Australian medical and biotechnology patents. The Government will also consult on whether a patent box would be an effective way of supporting the clean energy sector. 

Third, the Budget, as it always does, makes a few changes to superannuation (they cannot help themselves). These changes will hopefully apply from 1 July 2022.

Repealing the work test for voluntary superannuation contributions 

The Government will allow individuals aged 67 to 74 years (inclusive) to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution caps. 

Removing the $450 per month threshold for SG 

The Government will remove the current $450 per month minimum income threshold, under which employees do not have to be paid the superannuation guarantee by their employer. 

Self-managed Superannuation Funds — relaxing residency requirements 

The Government will relax residency requirements for self-managed superannuation by extending the central control and management test safe harbour from two to five years, and removing the active member test.

First Home Super Saver Scheme — increasing the maximum releasable amount to $50,000 

The Government will increase the maximum releasable amount of voluntary concessional and non-concessional contributions under the First Home Super Saver Scheme from $30,000 to $50,000. 

Reducing the eligibility age for downsizer contributions 

The Government will reduce the eligibility age to make downsizer contributions into superannuation from 65 to 60 years of age. The downsizer contribution allows people to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. Both members of a couple can contribute in respect of the same home, and contributions do not count towards non-concessional contribution caps. 

Early release for victims of family and domestic violence

The Government will not proceed with a measure to extend early release of superannuation to victims of family and domestic violence

And finally, there is always something in the Budget that makes you smile…

Ensuring New Zealand maintains its primary taxing right over members of its sporting teams and support staff due to COVID-19

The Government will ensure New Zealand maintains its primary taxing right over members of its sporting teams and support staff in respect of Australian income tax and fringe benefits tax liabilities that arise from exceeding the 183-day test as a result of being located in Australia for league competitions because of COVID-19.