This budget seems to be ‘more of the same’ from our government, nothing massively surprising here, nothing game-changing however there were a couple of hidden gems for individuals, specifically around superannuation.
Here we’ll take a look at the proposals that are likely to be most important to our clients. Given that these are just announcements at this stage there isn’t heaps of detail available, but as it comes to hand we’ll share what’s relevant with you all.
It’s worth noting the “stage 3” tax cuts proposed a few years back are already in legislation and are set to come in from 1 July 2024. As a reminder, these cuts will benefit anyone earning over $45,000 with most benefit going to high-income earners.
Retaining the Low and Middle Income Tax Offset (‘LMITO’) for the 2022 income year
The low and middle income tax offset to stay another year meaning it now finishes up at 30 June 2022. This is a refundable tax offset available to low and middle income earners who’ll receive the benefit when lodging their 2021 and 2022 tax returns.
The LMITO is proposed to apply as follows for the 2022 income year.
Full expensing of assets
This temporary measure has been extended out another year taking it to 30 June 2022. Depreciating assets purchased by any business (turnover less than $5bn) are eligible for an immediate and full deduction.
Note here that building costs and fit-outs aren’t included because they aren’t considered depreciating assets. Also note that the car limit still applies so you can only get a deduction for cars costing up to the limit of $59,136.
Loss Carry-back rules
This temporary measure has also been extended out another year to include the 2023 financial year meaning the years eligible are 2020, 2021, 2022 and 2023.
What is this about? It means that if you make a loss in one of those eligible years (2020-2023) you can “carry it back” to an earlier year where you made a profit with the earliest available year being 2019 and get a refund for the tax paid back in that profitable year.
Practically speaking- If you had a good year in 2019 and a bad year in 2021 (for example) you can get some of that 2019 tax refunded.
AAT stepping in for the little guy
The Small Business Tax Division (SBTD) of the Administrative Appeals Tribunal (AAT) are now able to step in and help defend small businesses from over-zealous debt collectors at the ATO stopping them from issuing garnishee notices and the like. If you’re a small business (turnover under $10m) with debt disputes with the ATO you can go to these guys and ask them to investigate on your behalf and whilst said investigation is going on the ATO aren’t allowed to harass you for the money.
Currently there is a “no super required if you earn under $450 a month” exemption from the superannuation guarantee rules, the proposed changes do away with this threshold. This is great news for people who don’t work enough currently to get contributions made on their behalf.
The amount of super an employer must pay for employees increases to 10% from 9.5%, from 1 July 2021. There was talk this may be deferred, but it appears to have been confirmed to be going ahead. This brings to light the importance of whether your salary packages are inclusive of super or plus super.
Under the current rules someone who is over 65 who sells their family home can make a contribution of up to $300,000 to superannuation. This age limit is being reduced to age 60. This change will expand on the opportunity for many people nearing retirement to get an extra boost into their superannuation to help self-fund their own retirement.
The works test has also been removed for super contributions for people aged 67-74. What this means is any individual aged up to 74 years can make contributions to super but only salary sacrificed or non-concessional.
What’s in the Budget for rural and regional Australians
A major infrastructure spend includes funding for roads and rural telecommunications. Treasurer Josh Frydenberg shovelled $200 million into a national soil strategy and promised at least $630 million to improve aged care in rural and remote communities, in a largely positive budget for regional and rural Australians.
- $200 million is allocated for the National Soil Strategy, including rebates for farmers who provide soil data
- Aged care in rural Australia will receive $630 million over five years
- Farm Household Allowance debts will be waived by the Federal Government
He also committed $370 million to bolstering the nation’s biosecurity — but farmers and exporters hoping for assistance to recruit overseas workers or expand into foreign markets will be disappointed.
The federal government hopes that by extending tax incentives, and spending big on soil management and biosecurity, Australian farmers will recover from years of drought and the industry will be worth $100 billion by 2030.
When it comes to regional health, along with the much-needed shot in the arm for aged care, rural GPs have picked up increased funding.
Soil is a big focus of the government’s agriculture spend, with almost $200 million committed over four years to implement the National Soil Strategy.
The strategy includes a two-year pilot to provide rebates for farmers who share the results of soil testing. The pilot is also expected to purchase privately-held soil data.
A further $59.6 million has been committed to trial low-emissions feed supplements for livestock, and a National Soil Carbon Innovation Challenge is expected to help lower emissions through soil management.
An additional $32 million will go to the federal government’s Agriculture Stewardship program to promote on-farm biodiversity.
This includes funding to develop a trading platform to link buyers and sellers of biodiversity services and an enhancing remnant vegetation pilot, that could see farmers paid to leave native vegetation on farms.
A solid $630 million over five years will be spent to arrest the decline in aged-care services for rural, remote, Aboriginal and Torres Strait Islander people.
The funding includes $370 million over four years for aged-care providers to improve buildings and expand into under-serviced areas. Crucially, $35 million over four years has been allocated to help rural and remote providers to access a locum workforce, recruit permanent staff and incentivise the retention of permanent staff.
There is also $13 million to establish regional offices for aged-care support, as recommended by the Royal Commission into Aged Care.
The budget includes $2.3 billion of funding for mental health care and suicide prevention.
There is no new funding in this year’s budget to assist overseas workers to come to Australia, and help with labour shortages on farms, however the budget commits $25.2 million over four years to “attract people to modern agriculture job opportunities”, including seed funding for an industry-led pilot to attract school leavers to work in agriculture.
There is also an allocation of $4.6 million over four years to help agricultural businesses plan for workers, and $1.6 million over two years to amend the Take Up a Job program which helps people to relocate for employment.
Under the changes, employees will only need to work a minimum of 40 hours over two weeks to receive $2,000 in relocation assistance. The program will also be opened up to 17-year-olds for the first time.
The National Farmers’ Federation estimates the cost of disruption to international trade, including sanctions imposed by China, will cost the industry close to $40 billion over the next decade. $15 million will be spent over four years to promote Australia’s trade interests, including the appointment of a new agriculture envoy.
The budget notes that “while the ongoing trade restrictions from China have had significant impacts on specific firms and regions, many goods targeted by the restrictions have so far been successfully re-directed to other export markets, with limited impacts on Australia’s overall economic recovery”.
Farm Household Allowance
More than 5,000 farmers who have received the Farm Household Allowance will have business debts waived, in line with a recommendation from the 2018 FHA review, at a cost of almost $15 million to the government.
We understand that these debts were accrued when farmers receiving the allowance underestimated their earnings.
Roads and phones
The budget commits $85 million for the Regional Connectivity Program to deliver more broadband and mobile services to more than 80 locations and more than $15 billion over 10 years for road, rail and community infrastructure projects across Australia.
Prior to the release of the federal budget, the government had already announced $370 million to protect Australia from pests and disease, $600 million for a new resilience agency promised after the Royal Commission into the 2019-20 bushfires, and $65 million for rural and remote GPs.