The federal budget for families and individuals

The 2021 Federal Budget has been quite favourable for lower and middle income Aussies, senior Australians, women in the workforce and for the aged care and disability sectors.

Here we highlight some of the key tax measures affecting Australians, which include:

If you have any questions as to how this budget impacts you and your family, please contact your local Bentleys advisor. We are here to help you get where you want to be.

There were no additional tax cuts announced over and above those previously legislated. However, the Government announced an extension to the Low- and Middle-Income Tax Offset (LMITO) for the 2022 income year.

The LMITO provides a refundable tax offset of up to $1,080. The offset starts at $255 for those earning $37,000 or less. This then increases at 7.5 cents per dollar as your income increases, with the maximum amount of the offset being $1,080 available to those earning between $48,000 and $90,000. The offset then reduces by 3 cents per dollar until your taxable income reaches $126,000.

The Government has announced a $1.7 billion package designed to encourage women back into the workforce by reducing the out-of-pocket cost of childcare from 1 July 2022.

Under the current system, there is a cap on the amount of subsidy able to be received of $10,560 per child for families with combined income of more than $189,390. This cap will be removed for all families.

The package is also proposing to increase the subsidy for the second and subsequent children by 30 per cent up to a maximum subsidy of 95 per cent.

The New Home Guarantee Scheme will be extended to offer a further 10,000 places in 2021-22, specifically for first home buyers to build a new home or purchase a newly built home with a minimum 5 per cent deposit. This measure is also aimed at driving jobs in the construction industry.

The Government also announced a new measure aimed at providing support to single parents with dependents. From 1 July 2021, the Family Home Guarantee will offer 10,000 eligible single parents with dependents the opportunity to build a new home or purchase an existing home with as little as 2 per cent deposit. The scheme is open to first home buyers, as well as previous owner-occupiers.

There were a number of other measures aimed at individuals contained in the Budget, including:

  • Changes to the individual tax residency rules including a “bright line” test for tax residency meaning a person who is in Australia for 183 days or more during the income year will be an Australian tax resident. This will apply from the first income year after Royal Assent of the enabling legislation.
  • The Medicare Levy low income thresholds applicable for the 2021 income year will be increased to take into account recent movements in CPI.
  • The Government will remove the exclusion from claiming the first $250 of certain self-education expenses.

One of the significant items in the Budget is the increased spending on aged care reforms. In response to the Royal Commission into Aged Care Quality and Safety, the Government is investing $17.7 billion over 5 years to transform aged care for older Australians.

The Government response is a five year / five pillar aged care reform plan addressing:

  • home care: supporting home care including 80,000 new home care packages and care based on assessed needs
  • residential aged care services and sustainability: improving service suitability that ensures individual care needs and preferences are met including mandated front line care minutes
  • residential aged care quality and safety: improving access to and quality of residential care
  • workforce: growing a bigger, more highly skilled, professional and compassionate aged care workforce, and
  • governance: new legislation and stronger governance.

The Government is committing an additional $13.2 billion over four years to 2023-24 to support the National Disability Insurance Scheme.

There is also additional funding to update and add new health services to the Medicare Benefits Schedule and to support access to affordable medicines through the Pharmaceutical Benefits Scheme.

The Government will provide $11.2 million over four years from 2021-22 to support stronger consumer outcomes for members of superannuation funds. It will provide $9.6 million for the Australian Prudential Regulation Authority to supervise and enforce increased transparency and accountability measures as part of the already announced “Your Future, Your Super” reforms. It will also spend $1.6 million on Super Consumers Australia to support stronger consumer outcomes on behalf of superannuation fund members.

In a welcome announcement for those saving for a home, the First Home Super Saver scheme amount has grown from $30,000 to $50,000. This reflects the rise in house prices since the scheme began four years ago.

Despite speculation, the Superannuation Guarantee increase to 10 per cent from 1 July 2021 will go ahead as legislated.

The “Downsizer Contribution” scheme has been expanded by reducing the age of eligibility from 65 to 60. The downsizer scheme was introduced in the 2017-18 Budget and allows people who sell their family home to make a one-off, $300,000 contribution to their super, outside the concessional and other rules.

Self-funded retirees will also be able to more freely top-up their super. The Government has announced that the work test, which restricts people aged between 67 and 74 from making additional superannuation contributions, will be abolished.

Both measures will begin on 1 July 2022. They will enable older Australians more flexibility in contributing to superannuation.

The Government will also abolish the $450 a month threshold to pay compulsory super. This will boost the retirement incomes of thousands of part-time workers, expected to be from 1 July 2022. Employers are currently not required to pay superannuation for employees who earn below the threshold.

The SMSF residency requirements safe harbour period for non-resident trustees will be extended from two to five years, expected to be from 1 July 2022. The Government will also abolish the active member requirements.

The Government will provide $21.2 million over four years to improve the “Pension Loans scheme” uptake. The scheme is a voluntary, reverse-mortgage type loan to assist older people unlock equity in their houses to boost their retirement income. There will now be steps in place to ensure people do not end up owing more than their house is worth.

Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.

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