A stronger than expected economic recovery from the COVID-19 recession has resulted in a budget deficit of $161 billion, $52.7 billion lower than the government's expected deficit. With the virus still a threat to the global and domestic economy, the Budget contains various measures to support businesses and individuals with job creation, incentives, tax relief and superannuation changes.
Existing tax reliefs, including the low and middle-income tax offset, the temporary company loss carry back rules and the full expensing of depreciating assets will be extended for another 12 months. Other key changes include a modernised individual tax residency brightline test, tax concessions for medical and biotechnology innovations and removal of the $450 threshold to be eligible for superannuation guarantee.
It’s a big spending budget that’s being described as having ‘something for everyone’ – funding for aged care, the arts and major infrastructure projects.
Business owners will be pleased to see that various popular business measures introduced in last year’s budget have been extended by another year. These include the full expensing of eligible depreciable assets acquired, and the loss carry back offset, allowing certain losses to be deducted against earlier taxed profits to create a possible tax refund.
For Individuals, the Government will provide $782M over 4 years to assist with increasing home ownership participation via funding to the HomeBuilder program, support to single parents entering the housing market with a limited deposit under the Family Home Guarantee program and extending support under the first home loan deposit scheme. In addition, the low and middle income tax offset has been extended for another year.
Superannuation measures include from 1 July 2022 benefits for individuals aged 67 to 74 who will no longer be required meet the work test when making or receiving non concessional contributions, subject to existing contribution caps. Also, from 1 July 2022 the eligible age to make downsizer contributions into super will be reduced from 65 years of age to 60. The longstanding superannuation guarantee threshold of $450 per month is intended to be removed subject to the successful passage of legislation to Royal assent.
The Big Winners
Low- and middle-income earners
There’s an extra grand in the pockets of low- and middle-income earners. About 10 million will benefit from the tax offset, worth up to $1080 for everyone earning between $48,000 and $90,000, being extended.
Tradies, get that ute you’ve been eyeing. A scheme allowing almost all businesses to write off the full value of eligible assets they buy within 12 months has been extended until June 30, 2023. The government hopes businesses will have a bigger incentive to invest in the tools they need.
Single mums hunting for a home will need less money to crack into the market. They will now be able to buy a property with a 2 per cent deposit, and the government will guarantee up to 18 per cent of the loan.
First home buyers
And first-time homebuyers can get excited, too. The 5 per cent deposit scheme for 10,000 first-home buyers purchasing a new dwelling will continue, with the federal government guaranteeing up to 15 per cent of the loan. The First Home Super Saver will also allow up to $50,000 in voluntary contributions, up from $30,000, for a first home deposit.
Aged care residents
In a big response to horror revelations of the aged care royal commission, $17.7bn will be committed to fix the sector. The funding will include $10 per day for each resident, 80,000 new home care packages (taking the total to 275,000), and 33,000 new training places for nurses. Nurses and carers will have more face-to-face time with residents, but will be paid higher retention bonuses.
Working parents with a high income
Parents will be spending less on childcare. Families earning more than $189,390 will have the $10,560 annual subsidy cap for childcare removed, under changes set to come into effect in July 2022.
Farmers in fear of foreign diseases can breathe a little easier. Biosecurity in the agriculture sector has received $371m in a bid to keep out exotic pests, diseases and contain outbreaks onshore. The measures, including beefed-up pre-border biosecurity checks, are particularly aimed at African swine flu.
It’s an infrastructure bonanza. More than $10bn will be funnelled into infrastructure projects nationwide. The boost to the government’s $110bn, 10-year pipeline is expected to support an additional 30,000 jobs, on top of the 100,000 employees already working on road and rail projects.
Older Australians looking to downsize
Good news for empty nesters. Anyone aged over 60 looking to downsize their home can bolster their superannuation. Those eligible can put up to $300,000 earned from selling their property towards their super. For example, someone selling their home for $800,000 can buy a $500,000 unit, putting the rest directly into their super account. Previously, only people aged over 65 were eligible for the scheme.
Superannuation account holders
Part-timers will have their retirement nests feathered. A requirement for people to earn $450 per month before earning superannuation has been abolished. The superannuation rate will also increase to 12 per cent as legislated, despite speculation throughout the year the government would walk back the aim.
The government says this isn’t about China. Four defence bases in the Northern Territory will receive a revamp, totalling $747m. The plan was initially announced in 2019 at $500m, but the PM says the “significant” upgrade would help lift defence spending to 3 per cent of GDP.
Could the next pandemic vaccine be developed in Australia? Medical and biotech developers will see income tax on new patents slashed to 17 per cent from July next year, in a measure designed to encourage investment in research and development onshore. The government says it will also consult on expanding the scheme to the clean energy sector.
Housing package covers Home-Builder extension
The budget papers said the federal government will provide $782 million over the next four financial years to increase home ownership, support jobs in the residential construction sector and enhance housing data, the budget papers noted.
The now-closed HomeBuilder program accounts for the bulk of that funding – $774.8 million over two years from 2021/22 – after the construction commencement deadline was extended from six months to 18 months.
Specific Funding in the 2021 package includes:
• $774.8 million over 2 years from 2021–22 for the HomeBuilder program to extend the construction commencement requirement from 6 months to 18 months for all existing applicants
• establishing the Family Home Guarantee with 10,000 places from 2021–22 to support single parents with dependants to enter, or re-enter, the housing market with a deposit of 2%
• extending the first home loan deposit scheme to provide an additional 10,000 new home guarantees in 2021–22 to allow eligible first home buyers to build a new home or purchase a newly constructed home with a deposit of 5%
• $5.8 million over 3 years from 2021–22 to continue to support the Australian Housing and Urban Research Institute to deliver the National Housing and Urban Research Program
• $1.2 million over 4 years from 2021–22 for the Australian Institute of Health and Welfare to maintain and enhance the Housing Data Dashboard website, with costs partially offset by National Housing Finance and Investment Corporation research funding
Those wanting to travel overseas
If you have plans to spend Christmas in New York, don’t get your hopes up. The budget assumes inbound and outbound travel to Australia will remain low until the middle of next year, before a “gradual recovery”.
Tourism and aviation sectors have been decimated since COVID-19 abruptly put a halt to international travel and begged the government for targeted support. A $1.2bn package was announced months ago, but that was when we thought international borders would open later this year, and all Aussies would get their first jab by October. The government won’t meet either of those deadlines, but has given no extra support to the sector.
*Information within this publication has been sourced from Federal Budget 2021, Realestate.com.au and News.com.au.