Sydney-based CPAAI member firm, Accru Felsers, gives a quick round-up of the Australia Federal Budget 2021

Five months later than originally planned, as a result of the COVID-19 pandemic, Australian Treasurer Josh Frydenberg has delivered his second Federal Budget. As predicted by some, it did not deliver the long-promised surplus but instead, an economic recovery plan due to be implemented through 2021 and 2022. Australia member firm Accru Felsers summarises the key points.

The key economic points

This year’s Federal Budget is strongly focussed on economic recovery and striving towards low unemployment levels:

• This year’s deficit will be $106 billion, decreasing to $57 billion by 2025.
• Net debt will peak at $980 billion during 2024-25 - Australia’s economy contracted by 2.5% last year
• The current rate of unemployment is 5.6%. Lowering this is one of Treasury’s priorities and has already recovered to pre-pandemic levels.

Assumptions moving forward

The Federal Budget assumes that most domestic restrictions are lifted, all localised COVID-19 outbreaks are contained, and no prolonged State border restrictions are in place. 

International travel both into and out of Australia is expected to remain low until the middle of 2022, at which point there will be a gradual return of temporary and permanent migrants.

Major spending announcements

Announcements have been made to improve certain infrastructures across Australia, increase childcare subsidies, provide greater safety and economic security for women, and promote industry innovation and development. There has also been substantial support and reform for aged care following the "Care, Dignity and Respect" report released in March 2021.

How will the announcements impact you? 

• The Low and Middle Income Tax Offset of $1,080, along with the enhanced Low Income Tax Offset (now $700 rather than previous $445) has been extended for another year
• Resident tax rates for financial years commencing 1 July 2020, 2021, 2022 and 2023 remain
• Medicare is an additional 2% where applicable, making the top marginal rate is effectively 47%
• New tax residency rules will state that a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident
• A housing package has been announced to help first home buyers and builders
• $3.4 billion will be provided over five years to improve women’s workforce participation and economic security
• The $450 threshold for superannuation will be abolished from the start of the first financial year after Royal Assent of the enabling legislation
• Eligibility for Downsizer contributions will be reduced from age 65 to age 60
• The work test for voluntary superannuation contributions will be removed
• Increased flexibility for Self-managed Super Fund and Small APRA Fund residency 

What will the Federal Budget mean for your business?

• Businesses are being incentivised to spend and innovate, with tax cuts on offer expected to lead to jobs growth
• $1.2 billion funding has been allocated over 6 years from 2021-22 for a Digital Economy Strategy
• The full expensing of depreciable assets for businesses with turnover  under $5 billion has been extended for 12-months
• Eligible companies may continue to carry back tax losses from the 2022-23 income years to offset previously taxed profits in 2018-19 or later income years when they lodge their 2022-23 tax return
• A patent box tax regime to encourage innovation will tax corporate income derived from patents at a concessional rate of 17%
• The Government will remove the cessation of employment taxing point for the tax- deferred Employee Share Schemes (ESS) that are available for all companies.
• The effective life of intangible depreciating assets can now be self-assessed
• Employment incentives include the JobTrainer Fund extension, boosting apprenticeships wage subsidies and temporarily allowing workers on student visas to work more than 40 hours per fortnight, provided they are employed in tourism, hospitality or agricultural sectors.

For further information, visit the Accru Felsers profile page or their website.

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