The 2021-22 Federal Budget: For You & Your Family
Low and middle income tax offset extended
Date of Effect - From 1 July 2021 to 30 June 2022
As widely predicted, the Low and Middle Income Tax Offset (LMITO) will be extended for another year. The LMITO provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000 and will be retained for the 2021-22 year.
Taxable Income Offset
$37,000 or less $255
Between $37,001 and $48,000 $255 plus 7.5 cents for every dollar above $37,000, up to a maximum of
$1,080
Between $48,001 and $90,000 $1,080
Between $90,001 and $126,000 $1,080 minus 3 cents for every dollar of the amount above $90,000
The tax offset is triggered when a taxpayer lodges their tax return.
Medicare levy low income threshold
Date of Effect - 1 July 2020
The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from 1 July 2020 to take account of recent movements in the CPI so that low-income taxpayers generally continue to be exempt from paying the Medicare levy.
2019-20 2020-21
Singles $22,801 $23,226
Family threshold $38,474 $39,167
Single seniors and pensioners $36,056 $36,705
Family threshold for seniors and pensioners $50,191 $51,094
For each dependent child or student, the family income thresholds increase by a further $3,597 instead of the previous amount of $3,533.
$250 self-education expense reduction removed
Date of Effect - First income year after the date of Royal Assent of the enabling legislation
Currently, individuals claiming a deduction for self-education expenses sometimes need to reduce the deductible amount by up to $250. The rules in this area are complex as they only apply to self-education expenses that fall within a specific category and certain non-deductible expenses can be offset against the $250 reduction. This reduction will be removed, which should make it easier for individuals to calculate their self-education deductions.
Child care subsidy increase for families with multiple children under 5 in child care
Date of Effect - 1 July 2022
From 1 July 2022 the Government will:
Increase child care subsidies available to families with more than one child aged five and under in child care, and
Remove the $10,560 cap on the Child Care Subsidy.
For those families with more than one child in child care, the level of subsidy received will increase by 30% to a maximum subsidy of 95% of fees paid for their second and subsequent children (tapered by income and hours of care).
Under the current system, the maximum child care subsidy payable is 85% of child care fees and it applies at the same rate per child, regardless of how many children a family may have in care.
Why? In October 2020, analysis by the Grattan Institute revealed that mothers lose 80%, 90% and even 100% of their take-home pay from working a fourth or fifth day after the additional childcare costs, clawback of the childcare subsidy, and tax and benefit changes are factored in.
“Unsurprisingly, not many find the option of working for free or close to it particularly attractive. The “1.5 earner” model has become the norm in Australia. And our rates of part-time work for women are third-highest in the OECD.
Childcare costs are the biggest contributor to these “workforce disincentives“. The maximum subsidy is not high enough for low-income families, and the steep taper and annual cap limit incentives to work beyond three days, across the income spectrum,” the report said.
Underwriting home ownership
The Government has announced new and expanded programs to assist Australians to buy a home.
2% deposit home loans for single parents
Date of Effect - 1 July 2021
The Government will guarantee 10,000 single parents with dependants to enable them to access a home loan with a deposit as low as 2% under the Family Home Guarantee. Similar to the first home loan deposit scheme, the program will guarantee the additional 18% normally required for a deposit without lenders mortgage insurance.
The Family Home Guarantee is aimed at single parents with dependants, regardless of whether that single parent is a first home buyer or previous owner-occupier. Applicants must be Australian citizens, at least 18 years of age and have an annual taxable income of no more than $125,000.
5% deposit home loans for first home buyers building new homes
Date of Effect - 1 July 2021 to 30 June 2022
The First Home Loan Deposit Scheme will be extended by another 10,000 places from 1 July 2021 to 30 June 2022. Eligible first home buyers can build a new home with a deposit of as little as 5% (lenders criteria apply). The Government guarantees a participating lender up to 15% of the value of the property purchased that is financed by an eligible first home buyer’s home loan. Twenty seven participating lenders offer places under the scheme.
Under the scheme, first home buyers can build or purchase a new home, including newly-constructed dwellings, off-the-plan dwellings, house and land packages, land and a separate contract to build a new home, and can be used in conjunction with other schemes and concessions for first home buyers. Conditions and timeframes apply.
First home saver scheme cap increase
Date of Effect - Start of the first financial year after Royal Assent of the enabling legislation. Expected to be 1 July 2022
The first home super saver (FHSS) scheme allows you to save money for your first home inside your super fund, enabling you to save faster by accessing the concessional tax treatment of superannuation. You can make voluntary concessional (before-tax) and voluntary non-concessional (after-tax) contributions into your super fund and then apply to release those funds.
Currently under the scheme, participants can release up to $15,000 of the voluntary contributions (and earnings) they have made in a financial year up to a total of $30,000 across all years.
The Government has announced that the current maximum releasable amount of $30,000 will increase to $50,000.
The voluntary contributions made to superannuation are assessed under the applicable contribution caps; there is no separate cap for these amounts.
Amounts withdrawn will be taxed at marginal rates less a 30% offset. Non-concessional contributions made to the FHSS are not taxed.
To be eligible for the scheme, you must be 18 years of age or over, never owned property in Australia, and have not previously applied to release superannuation amounts under the scheme. Eligibility is assessed on an individual basis. This means that couples, siblings or friends can each access their own eligible FHSS contributions to purchase the same property.
JobTrainer extended
The Government has committed an additional $500 million to extend the JobTrainer Fund by a further 163,000 places and extend the program until 31 December 2022. JobTrainer is matched by state and territory governments and provides job seekers, school leavers and young people access to free or low-fee training places in areas of skills shortages.
Full tax exemption for ADF personnel - operation Paladin
Date of Effect - 1 July 2020
The Government will provide a full income tax exemption for the pay and allowances of Australian Defence Force (ADF) personnel deployed to Operation Paladin. Operation Paladin is Australia’s contribution to the United Nations Truce Supervision Organisation, with ADF personnel deployed in Israel, Jordan, Syria, Lebanon and Egypt.