Federal Budget highlights
The federal government has announced its Budget for the 2021–22 financial year. New spending initiatives are focused on a transition from broad-based support for the economy to a more targeted approach. This targeted approach supports a wide range of sectors in the economy and some policy areas where much-needed support is required.
- An extra $1.7bn has been allocated to child care. Costs will fall for families with two or more children in child care, and the annual cap on the subsidy will be removed. These changes will come into effect from 1 July 2022
- The low and middle income tax offset (LMITO), due to expire 30 June 2021, has been extended for another year. This offset gives workers earning less than $126,000 per year up to $1,080 of tax relief. This extension is expected to cost $7.8bn
- The new Family Home Guarantee program will help single parents buy a home. This program allows single parents with a household income of less than $125,000 to buy a home with a deposit of just 2%. The government guarantees the remainder of the deposit. There will be 10,000 places available from 1 July 2021
- The existing New Home Guarantee program has been extended, with another 10,000 places added. This program allows first home buyers to build or buy a new home with a deposit of just 5% with the government guaranteeing the remainder of the deposit
- The First Home Super Saver Scheme (FHSSS) has been tweaked. Currently, anyone seeking to save a deposit for their first home can make voluntary contributions to their superannuation fund, capped at $15,000 a year, to take advantage of the special tax treatment of super. The maximum they can save under the scheme is $30,000. That cap has been raised to $50,000 in the Budget
- The government already allows older Australians to make a post-tax downsizer contribution to super when they sell their family home. From 1 July 2022 the minimum age will be lowered from 65 to 60. This policy is designed to encourage downsizing and free up larger homes for families
- The Budget scraps the $450 per month superannuation threshold allowing super contributions to be paid on amounts less than this
For Businesses and Institutions
- The tax rate for small and medium companies has been ratcheted down for a number of years. From 1 July 2021 the tax rate will drop to 25% (from 30% in 2014/15)
- The temporary full expensing of capex and temporary loss carry-back provisions will be extended to include the 2022/23 financial year These two measures are expected to provide an additional $20.7bn in tax relief over the forward estimates
- Small craft brewers and distillers will receive up to $250,000 in tax breaks
- There are provisions to reduce taxes on R&D and a tax offset for digital game development
- There is $1.2bn in spending to support the tourism and aviation sectors. Measures include more than 800,000 half price air fares
- There is $300m for support of the creative and cultural sector
The Economists’ view
CommBank economists say the Federal Budget delivered fiscal measures designed to support a wide range of sectors and drive economic growth.
Things you should know
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