This year’s big spending budget was somewhat unexpected by many, given the large financial outlays during the COVID 19 pandemic. Interestingly though, a lot of the spending measures are not scheduled to commence until July 2022. A summary of the key changes to taxation and super are below:
Taxation
- Extension of temporary full expensing of purchase of capital assets. Eligible businesses can fully expense the cost of new assets once installed or first used on or before 30 June 2023. Second hand assets are also subject to the same rules as long as the business turnover is less than $50 million annually.
- Tax depreciation of some intangible assets are now subject to self-assessment of effective life rather than the 40 years previously prescribed. This includes patents, registered designs, copyrights and in house software.
- The company tax rate reduces to 25% from 1 July 2021.
- Extending the low and middle income tax offset, worth up to $1,080 to individuals and $2,160 for couples.
The above changes bring opportunities for capital investment and tax planning. We recommend you contact us if you wish to consider your business’s strategic direction.
Superannuation
- Abolishing the work test from 1 July 2022. The requirement to pass the work test from ages 67-74 will be abolished allowing you to contribute non concessional contributions to super without the need to meet the work test. This will also include the brought forward rule, which allows you to contribute up to 3 years of contributions in one year.
- Opportunity to even up spouse balances to increase superannuation in pension phase. We don’t have the detail on this yet but the government has signalled that where one spouse has exhausted their transfer balance cap (see below), they can withdraw and recontribute to their spouse who has available transfer balance cap space. This would increase the amount held in pension phase, meaning that the fund could hold more in tax free earnings.
- Reducing the downsizer contribution age from 65 to 60 years of age, meaning people in this age group can now sell their property and contribute up to $300k to super ($600k for couples) without affecting their other superannuation caps.
- Superannuation Guarantee Charge to increase to 10% from 1 July 2021
- Removing the $450 per month threshold for Superannuation Guarantee. From 1 July 2022 employers will be required to make Superannuation Guarantee for all employees regardless of how much they earn.
- Increase in concessional contribution caps from $25,000 to $27,500 per person. Increase in non-concessional contribution caps from $100,000 per annum to $110,000 from 1 July 2021.
- Increase in super transfer balance cap from $1.6 Million to 1.7 Million. This cap reflects the amount people can hold in pension phase. Applicable 1 July 2021.
The above changes are welcome on many fronts and may change your superannuation strategy going forward. Please note that some of the above changes are not yet passed into law and we recommend that you contact us if you intend to take advantage of any of the proposed measures.
This article appeared in our May 2021 newsletter. Author: Peter Gill
