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2021 Federal Budget - a soft campaign start for the next election

A lot can change in a year.

12 months ago, in May 2020, the first instalment of JobKeeper had just been paid.

Although we had just emerged from the first wave of COVID-19 infections better than some of our international peers, the economic outlook in May last year was decidedly bleak. Reputable commentators warned of an unprecedented economic recession, with unemployment potentially reaching 15 per cent.

Fast-forward to today, and in the words of Treasurer Josh Frydenberg, delivering his third budget, “Australia is coming back”.

The 2021 Federal Budget seeks to achieve several goals simultaneously including helping the economy continue to recover from the COVID-19 pandemic; responding to the findings of the aged care royal commission; announcing several policies that primarily benefit women; creating jobs; extending tax cuts & business incentives; as well as laying the groundwork for the next federal election. In brief, there is no shortage of SPENDING. As a result, our gross debt is projected to reach almost $1 trillion in 2025.

So what will this budget mean for you?

What it means for Small Business

  • The temporary investment tax incentive (instant Asset write-off) announced in last year’s budget has been extended for a further 12 months until 30 June 2023. Businesses with a turnover up to $5 billion will be able to deduct the full cost of any eligible asset they purchase for their business, including the cost of improvements to existing assets, until 30 June 2023.

  • Temporary loss carry-back provision has also been extended for a further 12 months until 30 June 2023. Companies will now be permitted to carry back tax losses for an extra 12 months from the 2019-20, 2020-21, 2021-22 and now 2022-23 income years to offset previously taxed profits in 2018-19 or later income years.

  • The government is extending the SME Recovery Loan Scheme which builds on the SME Guarantee scheme. It includes an increased government guarantee of 80 per cent, a higher maximum loan size of $5 million and maximum loan term of 10 years with interest rates capped at around 7.5 per cent. Borrowers may also be offered repayment holidays of up to 24 months on appropriate products. The scheme is available for business’s with a turnover of up to $250 million that were recipients of the JobKeeper payment between 4 January 2021 and 28 March 2021.

  • The company tax rate for Small Businesses will drop to 25 per cent from 1 July 2021 from 27.5 per cent.

What it means for Individuals & Families

  • The Low and Middle-Income Tax Offset (LMITO), worth up to $1,080 for those earning from $48,000 to $90,000, has been extended for an additional 12 months to cover the 2021/22 financial year. LMITO will be received once individuals lodge their tax return for the 2021/22 financial year. This tax offset also applies for the current financial year (i.e. 2020/21 financial year)

  • Removal of current exclusion that applies to deductions for the first $250 spent on education courses, giving you a reason to learn new skills.

  • In response to the Royal Commission into Aged Care Quality and Safety, the Government announced an additional $17.7 billion over five years for aged care.

  • A new agreement between the states and federal government will result in $2 billion being delivered toward early education, allowing universal free access to preschools around the country. Children will receive access at least 15 hours a week, beginning from 1 July 2022.

  • The Budget confirmed that the Government will make an additional $1.7b investment in child care. The changes will commence on 1 July 2022. This initiative will include an increase in child care subsidies available to families with more than one child aged 5 and under and the removal of the $10,560 cap on the child care subsidy.

  • The Government has introduced the Family Home Guarantee (for single parents) as a way of providing a pathway to home ownership to support single parents with dependants. This is regardless of whether they are a first home buyer or a previous owner-occupier. From 1 July 2021, 10,000 guarantees will be made available over four years to eligible single parents with a deposit of as little as 2%, subject to an individual’s ability to service a loan.

  • The Government is providing a further 10,000 places under the New Home Guarantee in 2021/22. This is specifically for first home buyers seeking to build a new home or purchase a newly built home with a deposit of as little as 5%.

What it means for Superannuation

  • Employer contribution (Superannuation Guarantee) rate will increase from 9.5% to 10% on 1 July 2021

  • The Budget removes the current $450 per month minimum income threshold under which employees do not have Superannuation Guarantee (SG) paid by their employer.

  • From 1 July 2021, the concessional contributions cap is $27,500. This cap increases from $25,000.

  • Currently, Australians aged 67 – 74 must satisfy a work test (or the work test exemption) to be eligible to make super contributions. The work test will no longer apply when making non-concessional super contributions or salary sacrificed contributions.

  • The age at which people are eligible to make a downsizer contribution will reduce from 65 to 60. This will allow an after-tax contribution of up to $300,000 per person when they sell their family home.

  • The Pension Loan Scheme (PLS) is a voluntary, reverse mortgage type loan provided by the Government. It is designed to assist older Australians to boost their retirement income by unlocking equity in their Australian property. Through the PLS, people can receive regular fortnightly payments with the payments accruing as a debt secured against their property. The new option is to receive up to two lump sums of up to 50% of the Age Pension in a 12-month period. The maximum lump sum amount will depend on whether the individual is single or a member of a couple.

  • Consumers will be provided with a temporary option to transition from some legacy retirement products including to more flexible retirement products. Currently, individuals are locked into certain products that restrict access to capital and flexibility of drawdowns.

  • The First Home Super Saver Scheme (FHSSS), which was introduced in the 2017/18 Budget, allows people to save money for their first home inside their super. The Government will increase the maximum amount of voluntary contributions that can be released under the FHSSS from $30,000 to $50,000.

Please find following a link to more detail on the Australian Government's 2021-22 Federal Budget.

For more information call Cam on 0411 034 275 or email


The information presented is general in nature and not to be used, relied or acted upon without seeking professional advice to ensure that the information appropriate for your individual circumstances. National Taxation accepts no liability for any errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. ABN 63 665 545 130


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