The 2021 Australian Federal Budget included some measures which will assist individual taxpayers. The Budget is focused on continuing Economic recovery once again and some measures have been extended for 2022. A summary of those items of particular interest to individuals follows:
Retaining the Low and Middle Income Tax Offset (LMITO) for the 2022 year.
The current Low and Middle Income Tax Offset (LAMITO) will continue to apply for the 2022 income year (which is available in addition to the LITO for eligible taxpayers) rather than ceasing at 30 June 2021 as previously legislated.
The thresholds and amounts applicable for the 2022 year are as follows:
| Proposed LMITO for 2022 | |
| $37,000 or less | Up to $255 |
| $37,001 to $48,000 | $255 + 7.5% of excess over $35,000 |
| $48,001 to $90,000 | $1,080 |
| $90,001 to $126,000 | $1,080 - 3% of excess over $90,000 |
| $126,001+ | Nil |
For example, the maximum LAMITO of $1,080 will be available to taxpayers with taxable incomes of between $48,000 and $90,000 in the 2021 income year.
Increasing the Medicare Levy Low -income thresholds
The medicare levy low income threshold for singles, families, seniors and pensioners will be increase for the 2022 year as follows:
- Singles will increase to $23,226.
- Families will increase to $39,167.
- Single seniors & pensioners will increase to $36,705.
- Seniors and Pensioners with a family will increase to $51,094.
A further increase to the family thresholds of $3,597 per dependent child or student will occur.
Self-Education Expenses
The threshold of $250 for Self-Education expenses will be removed with amounts being able to be claimed from the first dollar. HECS/HELP fees will still be excluded.
This change will come into effect following the passing of the relevant legislation.
Residency Rules
The residency rules for tax purposes have evolved over time and are not inline with today's modern society. To modernize those rules the primary test will now be if someone is physically present in Australia for 183 days or more in any income year then they will be classified as an Australian Resident for tax purposes.
If you do not meet this test, you may be subject to a series of secondary tests that will depend on your own individual circumstances.
Employee Share Schemes - Cessation of Employment
Currently when you cease employment any Employee Share Scheme any you may have with that employer becomes taxable at that date, if you have elected a deferred taxing point.
Changes will be made to the relevant legislation to remove this condition.
In addition, there are changes which will remove some of the red tape around borrowing/lending between employers and employees for these schemes. These changes are aimed at enabling companies to engage and retain appropriate talent to be globally competitive.
Once again, the changes will not apply until appropriate legislation has been passed.
Changes to the First Home Super Saver scheme
The maximum releasable amount of voluntary concessional and non-concessional superannuation contributions will be increased from $30,000 to $50,000. This is aimed at assisting first home buyers in accumulating an applicable deposit.
Voluntary contributions of up to $15,000 per year, made after 1 July 2017 will be eligible to be released.
This is expected to apply from1 July 2022, subject to relevant legislation.
Changes to Childcare subsidies
Commencing on 1 July 2022 an additional 30% subsidy for every second and third child will be available. In addition, the $10,560 cap on child care subsidies will be removed.
Thresholds on income will be retained in assessing the availability of childcare subsidies.
Removing the Work Test for Voluntary Super Contributions
Currently those over 67 wishing to make non-concessional and salary sacrifice contributions to superannuation are required to satisfy the work test of 40 hours in 30 days. This test will be removed for those between 67-74 years of age. In addition, the 3 year bring forward rule will be available to these taxpayers.
The work test will be retained for personal deductible contributions.
This measure is expected to apply form 1 July 2022.
Reducing the Age Limit for Downsizer Contributions
The age limit from which downsizer contributions can be made by eligible individuals will be reduced from 65 to 60 years.
The downsizer contribution allows eligible persons to make a one-off, after tax, $300,000 per person contribution to superannuation on the disposal of an eligible dwelling.
It is anticipated once again that this change will take effect from 1 July 2022.
If you have any questions on the above announcements and how they may apply to you, please do not hesitate to contact our office.