20 May 2021
This year’s Federal Budget may not have contained much in terms of immediate tax implications, but it certainly delivered cash into areas where the Federal Government has received a lot of criticism, just in time for a Federal Election.
Whilst there was no significant tax reform, the outcome is some good investment in social initiatives to better support family safety, better early childhood education and care, better training and job opportunities for our youth, and more mental health support. Some of this will flow to business as incentives, some to support organisations.
The $1,080 low to middle income offset was retained for a further 12 months, cutting the tax bills for those on lower income temporarily. The big ticket Temporary Full Expensing (otherwise referred to as the instant asset write off) will be extended for another 12 months, which almost negates the immediate need to plan for these purchases to ensure delivery before 30 June next year. It’s even possible this might have the opposite effect of reducing the push for capital replacements now, potentially slowing some growth.
Business owners should look out for the removal of the employer exemption from superannuation guarantee for individuals earning less than $450 in salary or wages in a calendar month, which is planned to take effect from 1 July 2022. Small employers who rely on casuals, are likely to be impacted by this so, if you’re in this situation, you should seek advice and assistance quickly, as the consequences for underpaying superannuation are severe.
E-invoicing is an area that hasn’t had a lot of attention yet, but we are fast reaching the time when e-invoicing will be mandated, just like Single Touch Payroll is now. This Budget provides funds to speed up the roll out of what is going to be a significant change for a lot of small to medium businesses.
There are also some quiet little gems hidden in the pages of detail, including an allowance to reduce the impact of income reconciliation for farmers that were on Farm Household Allowance through the drought, particularly to allow assessment of this according to the most current rules.
There is support for Agricultural Show guilds to reduce cost pressures, and spending allocated for agricultural training programs. Further investment will be made into helping agribusinesses expand their export capabilities and open new markets, which will be welcome news to those that have had export challenges recently. Increased investment in import biosecurity will reduce the risk of large scale damage from a quarantine blunder. All this and more feeds into building solid foundations in the agriculture sector, which drives so much of our regional economy and well-being.
The Budget also includes support for building the workforce generally, a move that will be welcomed by all businesses currently struggling to find workers and skills. Although this will have a longer-term payoff, it is likely to have broad benefit by increasing the number of future taxpayers.
Other big changes are to superannuation and first home buyer support. The Government will make superannuation contributions easier for older taxpayers by removing the Work Test for Australian’s who make non-concessional (after-tax) contributions or salary sacrifice to Super. This is likely to result in more money being tucked away in early retirement. And the first home buyer support should encourage early superannuation savings by young people, knowing they can pull out amounts to assist with the purchase of their first home.
Even better for young people will be the additional support to access lending for purchasing a first home. Hopefully, this doesn’t just increase the price of houses in this range by a similar amount.
Federal Budget 2021/22 is going to provide a little something for most people, whether direct or indirect. Overall, it’s a Budget with a view to building long term outcomes, which should help to cement recovery from the recent recession. Whilst the projected debt levels seem eye-watering, spending money in foundational areas should improve business resilience and individual skill and capacity, which are going to contribute to solid long-term growth.
See our full Federal Budget Analysis
Our team of experts has developed insights and analysis that breaks down what the Budget means for Australian businesses and individuals. Check out the full coverage of the Federal Budget 2021/22.