On May 11, Treasurer Josh Frydenberg announced this year’s federal budget (2021-22), and now the dust has settled we put it under the microscope to break it down for you. The overall message was that the Australian economy is recovering strongly from the COVID-19 recession. In fact, it’s set to return to pre-pandemic levels, nine months earlier than last year’s prediction.
This year’s federal budget aims to build on this success and further drive down the unemployment rate. Its main areas of focus are tax, apprenticeships and training, infrastructure and essential services. But how will the provisions affect you?
Here’s a quick summary of the main areas of the Australian federal budget 2021-22 that affect individuals and small to medium businesses and business owners.
Business
Tax cuts for small and medium businesses
The government will deliver more than $16 billion in tax cuts to small and medium businesses by 2023-24. This includes reducing the tax rate for SMB companies from 26 per cent to 25 per cent in July 2021.
Tax incentive extension for businesses that invest
The temporary investment tax incentive announced in the 2020-21 budget has been extended for a further 12 months until June 2023.
This means that businesses with a turnover of up to $5 billion or companies that satisfy the alternative test will be able to deduct the full cost of any eligible business assets they purchase. This includes the cost of improvements to existing assets.
Temporary loss carry-back provision for SMBs
Small to medium businesses will also now be able to carry back tax losses for an additional 12 months from 2019-20, 2020-21, 2021-22 and now 2022-23 to offset previously taxed profits from 2018-19 and later years.
Extension of loan scheme for small businesses
The government is extending the SME Recovery Loan Scheme for small businesses with turnovers of up to $250 million. This includes:
- an increased government guarantee of 80 per cent
- a higher maximum loan size of $5 million; and
- a maximum loan term of 10 years with interest rates capped at around 7.5 per cent.
Borrowers can also take advantage of repayment holidays of up to 24 months on relevant products.
Increased training and apprenticeships
$500 million has been added to expand the JobTrainer Fund by a further 163,000 places. The fund will support the training of digital skills and critical services such as aged care. It’s intended to support jobseekers, school leavers and young people.
The government is also spending $2.7 billion to extend the Boosting Apprenticeship Commencements program. This program offers businesses a 50 per cent wage subsidy over 12 months for new trainees or apprentices.
Reduction of regulatory burdens for businesses
As part of its continuing deregulation agenda, the government is putting a further $134.6 million into making it easier for businesses to employ people and reducing the regulatory burdens businesses face when interacting with the government. This will significantly reduce compliance costs.
With its tax cuts, support measures and programs, the federal budget 2021-22 has been favourable to Australian’s and Australian businesses, notably SMBs. Individuals and households will have more cash, and companies will have a better chance of staying buoyant. If you’re struggling, it should ease the strain.
Personal
Tax cuts for low and middle-income earners
To support household income, the government is delivering an additional $7.8 billion in tax cuts. To do this, it’s retaining the low and middle-income tax offset (LMITO) through 2021-2022. This means eligible individuals will receive personal tax cuts of up to $1,080, and couples can receive up to $2,160.
In addition to this, they announced $25.1 billion in household tax cuts under the legislated personal income tax (PIT) plan. In conjunction with the LMITO, this means individuals can benefit from up to $7,020 worth of tax cuts and couples $14,040.
More affordable childcare
$1.7 billion is being invested in making child care more affordable and helping boost women’s participation in the workforce. The Child Care Subsidy will be increased by 30 percentage points for the second and third child, capped at 95 per cent. This will leave many working families better off.
The $10,000 cap on childcare rebates for higher-income families will also be removed. This means if you’re in this bracket, you’ll no longer hit paying full fees by the end of the year.
Homebuilder extension and first time buyer subsidies
The government’s HomeBuilder scheme, which provided homeowners with up to $25,000 to renovate or build a new home, has been extended up to 18 months.
In addition, a further 10,000 places will be made available under the new home guarantee. This enables those looking to enter the property market to buy a property with no more than a 5 per cent deposit.
