The estimated 2021-22 Federal Budget deficit is $106.6 billion, falling to $57 billion in 2024-25 with net debt predicted to peak at $980 billion (40.9% GDP) by June 2025.

The Federal Budget includes bold GDP growth forecast of 4.25% in 2021-22 with unemployment forecast to fall to 4.75% in mid 2023.

 

 

The 2021/22 Federal Budget was announced on 11 May 2021, with the aim to provide incentives to increase the spending by taxpayers to assist in stimulating our economy and a focus on health issues for Australians.

Below provides an overview of some of the measures announced in the 2021/22 Federal Budget. It is always important to remember that the Budget night announcements are only statements of intended change, they are not law yet.

 

Personal Tax Changes

There were no significant announcements regarding personal tax cuts in this year’s Budget, as the changes were announced in the October 2020 Federal Budget and took effect from 1 July 2020. The Government remains committed to its next phase of personal tax reform which will take effect from 1 July 2024.

The 2020/21 announcements included an extension of low and middle income tax offsets (LIMTO) for 12 months through to 30 June 2021.In this year’s Budget, the Government announced a further extension of the availability of this offset for an additional 12 months. Providing a tax savings of $1,080 per person for individuals on taxable incomes between $48,000 and $90,000.

 

Business Tax Changes

The eligible capital assets acquisition for businesses with aggregated annual turnover of less than $5 billion announced in last year’s Budget has extended from being first used or installed from 7:30pm AEST on 6 October 2020 (Budget Night) to 30 June 2023.

 

Superannuation

A significant ‘non-announcement’ from the Government regarding superannuation was there was no comment regarding the changes to the rate of super guarantee that you can earn as an employee. Meaning it will increase by 0.5% to a rate of 10.0% from 1 July 2021, it is currently legislated to increase at 0.5% per annum until it reaches a rate of 12.0% from 1 July 2025.

There were also a number of other changes announced to increase Australian’s ability to enhance their retirement savings via superannuation. The following measures are expected to commence from 1 July 2022;

  • Reduction in the qualifying age from 65 to 60 for a downsizer contribution of up to $300,000 can be made when selling a principal place of residence.
  • Deferring the start of the work test requirements to make a contribution to super from ages 67 to 75. This means that up to the age of 75, you can make an after-tax contribution of $110,000 each year without needing to meet a work test in that year.

 

Housing Assistance

The Government announced additional measures to assist first home owners, these include;

  • Establishing the Family Home Guarantee with $10,000 placed from 2021-22 to support single parents with dependents to enter, or re-enter the housing market with a deposit as little as 2.0%
  • Extending the First Home Loan Deposit Scheme to provide additional 10,000 New Home Guarantees in 2021-22 to allow eligible first home buyers to build a new home or purchase a newly constructed home sooner with a deposit of as little as 5.0%

 

Childcare

Announced prior to the 2021/22 Federal Budget formalities and a part of a wider range of announcements in the Budget targeted towards women. The Government will;

  • Increase the childcare subsidies available to families with more than one child ages five and under in childcare from 11 July 2022. Which will be facilitated by increasing the potential subsidy percentage for the second or third child by 30%, but capped at 95%. Families need to earn less than $353,680 to receive the additional subsidy. Which is expected to benefit around 250,000 families.
  • Removing the $10,560 cap of Childcare Subsidy from 1 July 2022, this cap is currently applicable for families who earn an annual adjusted taxable income of more than $189,390. This is expected to assist around 18,000 families.