HC Partners Office Update
Should you have any questions in relation to any of the items in this newsletter or would like to understand how they apply to your personal circumstances, please do not hesitate to contact the office.
Low and Middle Income Tax Offset (LMITO) extended
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. The tax offset is triggered when a tax return is lodged.
$250 self-education expense reduction removed
Currently, individuals claiming a deduction for self-education expenses sometimes need to reduce the deductible amount by up to $250. This reduction will be removed, which should make it easier for individuals to calculate their self-education deductions.
Increased Child Care Subsidies
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.
Temporary full expensing extended to 30 June 2023
Businesses will be able to continue to fully expense the cost of new and second-hand depreciable assets and the cost of improvements to existing eligible assets in the first year of use. This measure will enable an asset’s cost to continue to be fully deductible upfront rather than being claimed over the asset’s life, regardless of the cost of the asset. The extension means that the rules can apply to assets that are first used or installed ready for use by 30 June 2023.
Certain expenditure is excluded from this measure, such as
- improvements to land or buildings that are not treated as plant or as separate depreciating assets in their own right. Expenditure on these improvements would still normally be claimed at 2.5% or 4% per year.
- The car limit will continue to place a cap on the deductions that can be claimed for luxury cars (the car limit is currently $59,136).
Temporary loss carry-back extension
Under this measure tax losses can be applied against taxed profits in a previous year, generating a refundable tax offset in the year in which the loss is made. The amount carried back can be no more than the earlier taxed profits, limiting the refund by the company’s tax liabilities in the profit years.
The tax refund will be available on election by eligible businesses when they lodge their 2021-22 and 2022-23 tax returns and is available on previously tax profits from the 2018-19 year onwards.
$450 per month threshold for super guarantee removed
Currently, employees need to earn $450 per month to be eligible to be paid the superannuation guarantee. This threshold will be removed so all employees will be paid super guarantee regardless of their income earned.
Apprenticeship scheme uncapped
Boosting Apprenticeship Commencements provides a 50% wage subsidy to employers to take on new apprentices and trainees. The measure will uncap the number of eligible places and increase the duration of the 50% wage subsidy to 12 months from the date an apprentice or trainee commences with their employer.
From 5 October 2020 to 31 March 2022, businesses of any size can claim the Boosting Apprenticeship Commencements wage subsidy for new apprentices or trainees who commence during this period. Eligible businesses will be reimbursed up to 50% of an apprentice or trainee's wages of up to $7,000 per quarter for 12 months.
For more information about any of the above business announcements, please contact the office.
Work test repealed for voluntary super contributions
Individuals aged 67 to 74 years will be able to make or receive non-concessional or salary sacrifice superannuation contributions without meeting the work test. The contributions are subject to existing contribution caps and include contributions under the bring-forward rule.
Currently, the ‘work test’ requires individuals aged 67 to 74 years to work at least 40 hours over a 30 day period in a financial year to be able to make voluntary contributions (both concessional and non-concessional) to their superannuation, or receive contributions from their spouse.
Personal concessional (tax deductible) contributions will remain subject to the ‘work test’ for those aged between 67-74.
Expansion of downsizer contributions
From 1 July 2022, you can make downsizer super contributions if you’re age 60 and over (currently you need to be age 65 or over). Downsizer super contributions allows you to contribute a maximum of $300,000 (for each eligible member of a couple) to super up to the total proceeds from the sale of your home.
Downsizer contributions apply to sales of a principal residence owned for the past ten or more years.
For more information on the existing rules, click here.
Changes to the First Home Super Saver scheme
From 1 July 2022, if you’re a first home buyer you can release up to $50,000 (up from $30,000) from your voluntary super contributions to help you buy your first home. Under the scheme, voluntary concessional and non-concessional contributions made on or after 1 July 2017 may be released from super to help you purchase your first home.
Under the proposed changes, you can release up to $15,000 of voluntary contributions from any one financial year, up to a total of $50,000 in contributions across all financial years, plus earnings on those voluntary contributions.
For more information on the existing scheme, click here.
Relaxing residency requirements and legacy pensions for SMSFs
From 1 July 2022, if you have a self-managed super fund (SMSF) with old complying pensions (including term allocated or market-linked pensions) you will be able to exit these legacy pensions. For some SMSFs the cost of running these pensions has been more than the actual pension they receive.
Additionally, the residency rules for SMSFs will be relaxed so that you can be a non-resident for five years before affecting the SMSF residency rules. The ‘active member test’ will be removed for SMSFs.
You can also view all transfer balance cap information in ATO online or by contacting our office.
IOOF: The True Value of Advice
Recently, in conjunction with CoreData, IOOF surveyed nearly 13,000 Australians, regarding financial advice. The results showed overwhelmingly, that for those who receive financial advice, not only did their financial wellbeing improve, so did their mental and physical health. Discover more revealing insights about the true value of advice at https://www.ioof.com.au/financial-advice/the-true-value-of-advice or by watching this video
For further details on any of the above, please contact us.
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