the maximum period of deferral of 15 years.
This change will result in tax being deferred until the earliest of the remaining taxing points.
Modernising the individual tax residency rules
Australia’s current tax residency rules are difficult to apply in practice, creating uncertainty and resulting in high compliance costs for individuals and their employers. The Government will replace the individual tax residency rules with a new, modernised framework.
The primary test will be a simple ‘bright line’ test — a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident.
Individuals who do not meet the primary test will be subject to secondary tests that depend on a combination of physical presence and measurable, objective criteria.
Temporary full expensing extension
The Government will extend this 2020-21 Budget measure for 12 months until 30 June 2023 to further support business investment and the creation of more jobs.
Temporary full expensing will be extended to allow eligible businesses with aggregated annual turnover or total income of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30pm on 6 October 2020 and first used or installed ready for use by 30 June 2023.
All other elements of temporary full expensing will remain unchanged, including the alternative eligibility test based on total income, which will continue to be available to businesses. From 1 July 2023, normal depreciation arrangements will apply.
Reducing the eligibility age for downsizer contributions
The Government will reduce the eligibility age to make downsizer contributions into superannuation from 65 to 60 years of age.
The downsizer contribution allows people to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. Both members of a couple can contribute in respect of the same home, and contributions do not count towards non-concessional contribution caps.
Repealing the work test for voluntary superannuation contributions
The Government will allow individuals aged 67 to 74 years (inclusive) to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test (subject to existing contribution caps).
Individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions.
Currently, individuals aged 67 to 74 years can only make voluntary contributions (both concessional and non-concessional) to their superannuation, or receive contributions from their spouse, if they are working at least 40 hours over a 30-day period in the relevant financial year.
Removing the $450 per month threshold for superannuation guarantee eligibility
The Government will remove the current $450 per month minimum income threshold, under which employees do not have to be paid the superannuation guarantee by their employer.
This measure will improve equity in the superannuation system by expanding the superannuation guarantee coverage for cohorts with lower incomes. The Retirement Income Review estimated that around 300,000 individuals (the majority - 63 per cent - are women) would receive additional superannuation guarantee payments each month.
WOMEN AND FAMILIES
Women’s Economic Security Package
The Government will provide $1.8 billion over five years to improve women's workforce participation and economic security. Funding includes:
- assistance to families by reducing out of pocket costs and supporting parental choice through increasing the Child Care Subsidy (CCS) rate by 30 percentage points for the second child and subsequent children aged five years and under in care, up to a maximum CCS rate of 95 per cent for these children, commencing on 11 July 2022
- removing the CCS annual cap of $10,560 per child per year commencing on 1 July 2022.
The Government will provide $998.1 million over four years from 2021-22 for initiatives to reduce, and support the victims of, Family, Domestic and Sexual Violence (FDSV) against women and children.
- implementation and enhancement of a range of programs and initiatives that directly support women and children who have been subjected to FDSV
- support of programs aimed at the prevention of FDSV, to support education on consent and respectful relationships and to improve training outcomes for those who may encounter FDSV
- further supporting services that assist vulnerable women and children to engage with the legal system, increase access to Children's Contact Services and support the development of improvements in the legal system in dealing with FDSV.
Aged Care — Government response to the Royal Commission into Aged Care Quality and Safety
The Government will fund a $17.7 billion whole-of-government response to the recommendations of the Royal Commission into Aged Care Quality and Safety (the Royal Commission) to improve safety and quality and the availability of aged care services.
This funding provides for:
- releasing 80,000 additional home care packages over two years from 2021-22. This will bring the total number of home care packages to 275,598 by June 2023
- providing greater access to respite care services and payments to support carers
- supporting senior Australians to access information about aged care, navigate the aged care system and connect to services through the introduction of dedicated face-to-face services
- improving access to primary care and other health services in residential aged care, and additional investment in digital and face-to-face assistance to make it easier to navigate the aged care system
- introducing a new star rating system to provide senior Australians, their families and carers with information to make comparisons on quality and safety performance of aged care providers
- increasing the amount of front-line care (care minutes) delivered to 240,000 aged care residents and 67,000 who access respite services, by 1 October 2023. This will be mandated at 200 minutes per day, including 40 minutes with a registered nurse
- supporting aged care providers to deliver better care and services through a new Government-funded Basic Daily Fee supplement of $10 per resident per day.
The Government will provide $119.9 million over four years from 2021-22 to increase Australia’s consular capability and provide additional support to vulnerable Australian citizens overseas whose return to Australia has been impacted by COVID-19 travel restrictions.
The Government will provide $845.3 million over two years from 2020-21 to support the Government's emergency response to COVID-19. Funding includes the expansion of quarantine services in the Northern Territory. The cost of this measure will be partially recovered from people who quarantine at this facility.
Vaccine purchases and rollout
The Government will provide $1.9 billion over five years from 2020-21 to distribute and administer COVID-19 vaccines to residents of Australia.
- supporting the COVID-19 Vaccination Program, including for surge workforce, general practitioners and community pharmacies to administer vaccines
- support for COVID-19 vaccine distribution, vaccine consumables, logistics and storage.
The Government has also entered into advance purchase agreements for an additional 30 million doses of the Pfizer BioNTech vaccine and has provisioned to purchase additional vaccine doses, including mRNA vaccines.
The Government will provide funding to develop an onshore mRNA vaccine manufacturing capability in Australia.
- continuing negotiations with existing manufacturers and approaching the Australian market to establish an onshore end-to-end mRNA vaccine manufacturing capability in Australia to develop COVID-19 vaccines and other potential products, such as flu vaccines
- approaching the Australian market for a long-term sovereign mRNA manufacturing capability to establish end-to-end onshore capability.
Not for profits
Enhancing the transparency of income tax exemptions
The Government will provide funding to the ATO to build an online system to enhance the transparency of income tax exemptions claimed by not-for-profit entities (NFPs).
Currently non-charitable NFPs can self-assess their eligibility for income tax exemptions, without an obligation to report to the ATO.
From 1 July 2023, the ATO will require income tax exempt NFPs with an active Australian Business Number (ABN) to submit online annual self-review forms with the information they ordinarily use to self-assess their eligibility for the exemption. This measure will ensure that only eligible NFPs are accessing income tax exemptions.
Just in case you were wondering about how the Government will support agricultural shows…The Government has committed to providing $4.3 million in 2021-22 to support agricultural showmen and women for the operational costs associated with their participation at agricultural shows.
To find out more about any of the measures outlined above and how they might impact you, please contact your client relationship or trust manager directly. If your not already a client of Equity Trustees Contact Us
This article was written by Chris Holloway, Senior Manager of our Taxation Services team.