Many individuals will also directly benefit from the 2021-22 Federal Budget with reduced taxes for low and middle income earners, support for child care, greater access to voluntary superannuation contributions under the Government’s First Home Super Saver Scheme and also changes to encourage retirees to contribute more to superannuation.
Personal income tax rates and thresholds
This year, the Government has not announced any change to personal income tax rates or thresholds. The current personal income tax rates and thresholds remain unchanged until the commencement of the currently legislated Stage 3 of the Personal Income Tax Plan which is due to commence from 1 July 2024.
The following table summarises the tax rates and thresholds applicable to a tax resident individual.
The 2021-22 Budget has extended the LMITO for one more year until 30 June 2022, which will operate to ensure that low and middle income earners can continue to secure a tax cash boost for the year ahead. This benefit ranges from $255 for taxpayers earning less than $37,000 and up to $1,080 for workers earning between $48,000 and $90,000. The tax offset then phases out for taxpayers earning up to $126,000.
More deductions allowed for self-education expenses
Individual taxpayers are entitled to claim a tax deduction for self-education expenses. However, under the current rules for certain expenses (e.g. tuition fees, textbooks, stationery, etc.), the first $250 are not tax deductible. In this Budget, the Government has announced that it will remove this exclusion effective from 1 July following the enactment of enabling legislation. This means that if legislation is enacted before 30 June 2021, all self-education expenses relating to a prescribed course of education would be deductible in the 2021-22 tax year.
Enhanced childcare support
The Government will support families by making an additional $1.7 billion investment in child care as part of the 2021-22 Budget. Although no longer administered through the income tax system, the Government announced that it will increase the Child Care Subsidy (CCS) available to families with more than one child aged five and under in care, by 30 per cent to a maximum subsidy of 95 per cent of fees paid for their second and subsequent children commencing in July 2022.
The Government will also remove the CSS annual cap of $10,560 per child per year commencing on 1 July 2022.
Medicare levy low-income thresholds
The Medicare levy low-income thresholds for singles, families, seniors and pensioners will increase from the 2020-21 income tax year as follows:
- Individuals $23,226 (increased from $22,801)
- Families $39,167 (increased from $38,474), with an additional $3,597 for each dependent child or student (increased from $3,533)
- Single seniors and pensioners $36,705 (increased from $36,056), and
The family threshold for seniors and pensioners will be increased to $51,094 (increased from $50,191) plus $3,597 for each dependent child or student (increased from $3,533).
Removing the $450 per month threshold for superannuation guarantee eligibility
Effective 1 July 2022, the Government will remove the existing $450 per month minimum salary or wages threshold that resulted in low income employees not receiving any superannuation guarantee support. This change will simplify the rules for employers and add some further fairness into our superannuation system.
Expanding access to First Home Super Saver Scheme
The First Home Super Saver Scheme (FHSSS), which has applied since 1 July 2017, will be expanded to increase the maximum amount of voluntary contributions that can be released under the scheme from $30,000 to $50,000. Under the FHSSS, first home savers who make voluntary concessional and/or non-concessional contributions up to $15,000 per year into the superannuation system are able to concessionaly withdraw those contributions (up to certain limits) and an amount of associated earnings for the purposes of purchasing their first home.
The increase will apply from the start of the first financial year after Royal Assent (expected to be 1 July 2022). The Government will also make four minor technical changes to the legislation underpinning the FHSSS, which will apply retrospectively from 1 July 2018.
This measure is part of the Federal Government’s policy to improve opportunities for home ownership and applies in conjunction with the existing HomeBuilder program and a new Family Home Guarantee scheme to be established to provide 10,000 Government-supported guarantees over four years to single parents with dependants to enable them to purchase a home with a deposit of as little as two per cent. The existing New Home Guarantee, which allows first home buyers seeking to build a new home or purchase a newly built home to do so with a deposit of as little as five per cent is extended for a second year with an additional 10,000 places offered in 2021-22.
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