Key Budget outcomes for business owners
To help create jobs, business investment and confidence after COVID-19 created the first recession since 1990, the Federal Government has just released a big-spending 2021-22 Federal Budget.
Based on our analysis, the big winners appear to be:
- Business – the instant tax deduction for buying equipment, cars, computers, etc. and the loss carry back for companies is extended for another year.
- Low to middle-income taxpayers can enjoy another year of the tax offset of up to $1,080 for individuals or $2,160 for dual-income/working couples. You get this after you lodge your 2021 tax return.
- Job seekers – given that economic growth is expected to be at 4.25% in 2021/22 and big government spending, unemployment is expected to fall to lower than 5% this year.
- Retirees – the downsizing rule means that 60-year-olds and older can sell a big home, buy a smaller one and put $300,000 each into super. This is fantastic. It was previously only open to over 65-year-olds and older. Getting rid of the “work test” for those 67 to 74 years of age means retirees can put up to $100,000 a year into super over that time.
- Young savers – under the First Home Super Scheme, $50,000 can be dragged out of super rather than $30,000 for a deposit for a home loan. But remember, it is for super contributions the saver has put in on top of what the employer has put in. This may be the best place to save for a deposit as super funds have returns around 7%, which most banks cannot compete with.
- Homebuyers – the New Home Guarantee scheme means new homebuyers will only have to find a 5% deposit. The Family Home Guarantee scheme means single parents will only have to find a 2% deposit to get a loan for a home.
There are a number of key areas we would like to make you aware of.
Business Owners
| Key Point | Benefit to You |
| Company Tax Rate of 25% for 2022 tax year From 1 July 2021, the company tax rate for “base rate” companies will reduce from 26% to 25%. | Less Tax to Pay It may be possible to defer some income from this 2021 tax year to the 2022 tax year to reduce your company tax. |
| Stage 3 Individual tax cuts remain unchanged From 1 July 2024 onwards, individual income up to $200,000 will be taxed at a maximum of 30%. | This may help you manage your Div7A loans better. If you have a company with Div7a Loans, careful planning of your Div7A loan repayments could significantly improve your tax position. We need to review this as part of your 2021 Tax Planning. |
| Company Loss Carry Back extended to 2023 Current year losses can be offset against prior year profits of Companies. | This could result in significant tax refunds for you. If you have a Company, as part of 2021 Tax Planning you need to consider your tax position from 1 July 2019 and forecasts of your tax position until 30 June 2023. |
| Temporary Full Expensing extended to 30 June 2023 If your business turnover is less than $5 billion, you can deduct the full cost of eligible depreciating assets of any value. | This could significantly reduce tax payable and could result in significant tax refunds for you. An immediate full deduction for the cost of these assets will reduce your 2021 tax. If you purchase enough assets to create a tax loss this year, combining this with the Loss Carry Back could give you significant tax refunds of tax paid in prior years. |
Next steps
Contact us in Dalby, Toowoomba or Chinchilla on 07 4669 9800! To get the maximum benefits from the new measures announced in the 2021 Federal Budget, please contact us immediately to book your 2021 Tax Planning meeting with us. We look forward to assisting you!
