8 TAX CHANGES TAKING EFFECT FROM 1 JULY 2021

Jul 01, 2021

The only constant about tax is change. Dr Adrian Raftery, principal of Mr Taxman and author of 101 Ways to Save Money on Your Tax - Legally! 2021-2022 edition (Wiley, May 2021, AU$29.95), provides us with some of the tax changes coming into play from 1 July 2021.

1.       Company tax rate for small businesses

The corporate tax rate for small/medium companies (with turnover under $50 million) will reduce to 25 per cent in the 2021-22 year from the current 26 per cent. Note that companies which have passive income (such as interest income, rent, royalties, dividend income and net capital gains) constitutes more than 80 per cent of their assessable income are taxed at 30 per cent regardless of their size.

2.       Low and middle income tax offset

Some bad news for individuals.  Expect to pay up to $1,080 more tax this coming year as the 2020–21 federal budget removed the low and middle income tax offset (LMITO) for the 2021–22 year. In the 2020–21 year, the LMITO was an additional tax rebate of $255 for individuals who earned less than $37,000. The offset was increased by 7.5 cents for every dollar to $48,000 and was at $1,080 for taxable incomes up to $90,000. The offset was reduced by 1.5 cents for every dollar that your taxable income exceeded $90,000, before it was eroded entirely at $126,000.

3.       Super guarantee contributions increase

After no changes for several years, the superannuation guarantee contributions (SGC) will have a 0.5 per cent increase in the 2021–22 financial year to 10% of ordinary time earnings. There will be annual 0.5 per cent rises until the SGC reaches 12 per cent in 2025–26.    

4.       Super contribution limits lifted

The concessional contributions limit will be lifted from $25,000 to $27,500 for all individuals.   As a result the non-concessional contribution – which is 4 times the concessional limit – will also rise from $100,000 to $110,000.  The three year bring forward rule also increases to $330,000 from $300,000 for individuals under the age of 65 with a total superannuation balance of less than $1.48 million.

5.       Minimum drawdown relief for account-based pensions no longer available

Over the last few years, the minimum amounts required to be drawn from allocated pensions were halved as a result of superannuation fund balances getting hammered during COVID-19.  This relief is no longer available for the 2021-22 year and beyond with the minimum drawdown being 4% for those under age 65 increasing to 14 per cent for those aged 95 and over.

6.       Transfer Balance Cap rising

From 1 July 2021 there will be an increase to the transfer balance cap – the amount that you can have in a ‘tax-free’ retirement phase superannuation account - from $1.6 million to $1.7 million.

7.       Single Touch Payroll

In the past few years, the government has been slowly transitioning businesses to using Single Touch Payroll (STP).  In the latest stage, employers must report their closely held payees through STP from 1 July 2021. Also the eligibility criteria for the STP quarterly reporting concessions for micro employers (employing between 1 to 4 employees) will change and will only be available to micro employers who meet certain eligibility requirements (which now include the need for exceptional circumstances to exist).

8.       Export Market Development Grants

From 1 July 2021, SMEs with turnover under $20 million can apply for these export market development grants of up to $770 000 over an eight-year period:

• tier 1 — up to $40 000 per year over two years — for eligible SMEs new to exporting

• tier 2 — up to $80 000 per year over three years — for eligible exporters planning on expanding their presence in current markets or enter new markets

• tier 3 — up to $150 000 per year over three years — for eligible exporters who are planning a strategic shift in their exporting business.

 

This information is of a general nature only and does not constitute professional advice. You must seek professional advice in relation to your particular circumstances before acting.

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These tips were provided by Mr Taxman, Adrian Raftery, author of 101 Ways to Save Money on Your Tax - Legally! 2021-2022 edition (Wiley, May 2021, AU$29.95). @mistertaxman www.mrtaxman.com.au

101 Ways to Save Money on Your Tax - Legally! 2021-2022 edition 

101 Ways to Save Money on Your Tax – Legally! 2021-2022 edition

By Adrian Raftery

Published by Wiley May 2021

ISBN 9780730391616

AU$29.95 / NZ$28.99

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For further information or to request an interview, please contact: Adrian Raftery on 1800 TAXMAN (1800 829 626) or 0418 210 599 adrian@mrtaxman.com.au

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