Newsletter; 2020/2021 Budget Update (your five minute guide)
Please find below a summary of the some of the more relevant budget announcements that affect taxation.
2021/2022 individual tax rates
Taxable income range Marginal tax rate
$ 0 - $18,200 0%
$ 18,201 - $45,000 19%
$ 45,001 - $120,000 32.5%
$120,001 - $180,000 37%
$180,001+ 45%
These rates exclude the 2% Medicare Levy.
The effective top personal marginal tax rate is 47% including the Medicare Levy.
Low and Middle Income Tax Offset
From 1 July 2021, it is proposed that the existing low and middle income tax offset will remain until 30 June 2022. The offset is currently $1,080 (maximum) where taxable income is between $48,000 and $90,000.
This offset applies in addition to the Low Income Tax Offset which is currently $700 (maximum) where taxable income is below $37,500.
Self-education expenses
From 1 July 2022, it is proposed that the government will remove the current exclusion of the first $250 of prescribed courses of self-education expenses.
Small business asset deductions
From 12 May 2015, small business entities are able to immediately write off each eligible business asset they buy costing less than $20,000 per asset.
From 29 January 2019, the threshold was increased to $25,000.
From 2 April 2019, the threshold was increased to $30,000 and made available to medium business entities (with a turnover less than fifty million dollars).
From 12 March 2020 to 30 June 2021, the threshold increased to $150,000 and made available to large business entities (with a turnover less than five hundred million dollars).
From 6 October 2020 to 30 June 2023, the threshold for new business assets will be uncapped and will be available to all business entities with a turnover less than five billion dollars.
Small businesses can also deduct the value of their simplified depreciation pools at the end of the income year where the balance falls under the relevant threshold.
Company loss carry-back
Companies with a turnover of less than five billion dollars will be able to elect to carry back losses from the 2020, 2021, 2022 or 2023 income years to offset previously taxed profits made in or after the 2019 income year. This will be available in the 2021, 2022 and 2023 tax returns and will allow a company to generate a refundable tax offset (as long as the carry back does not generate a franking account deficit).
Employee superannuation
From 1 July 2021, the super guarantee rate will increase to 10.00%.
2020/2021 9.5%
2021/2022 10.0%
2022/2023 10.5%
2023/2024 11.0%
2024/2025 11.5%
2025/2026 12.0%
From 1 July 2022, it is proposed that the $450 minimum income threshold before super is paid will be removed.
Superannuation contribution restrictions
From 1 July 2020, individuals aged:
- 65 to 66 no longer need to meet the “work test” or satisfy the “work test exemption” to make certain superannuation contributions;
- 67 to 74 will need to meet the “work test” or satisfy the “work test exemption” to make certain superannuation contributions.
The work test requires a minimum of 40 hours worked in any 30 day period in the financial year.
The work test exemption allows all individuals aged 67 to 74 with superannuation balances below $300,000 to make superannuation contributions in the first year that they do not meet the work test requirements.
From 1 July 2022, individuals aged 67 to 74 will no longer be required to meet the “work test” when making non-concessional or salary sacrificed contributions (they will also be able to access the bring-forward rule). The “work test” will still apply to concessional contributions.
