TAX UPDATES

2021 TAX UPDATES

Super contribution age limits to change

FBT exemption for retraining and reskilling

Low and middle income tax offset

Granny flat arrangements set for CGT exemption

Members of regulated superannuation funds now have no restrictions for making voluntary contributions prior to reaching 67 years of age.

The new legislation also extends the ability for members to make bring forward contributions, making more individuals eligible to make 3 years' worth of contributions.

The legislative and regulatory changes only relate to voluntary contributions, as employer contributions have different rules relating to individuals over the age of 65.

An exemption from fringe benefits tax has been proposed for when an employer provides an employee with retraining or reskilling opportunities at or prior to redundancy.

This new law takes effect from 2 October 2020, and is now law.

These measures may provide a tax incentive for employees to change careers, in particular if they are about to be made redundant. For employers, it is an opportunity to provide a group of employees with training opportunities in situations where part of the business is due to close down in coming years.

The low and middle income tax offset (LMITO) was introduced in the 2018 federal budget to commence from 1 July 2018. The offset runs in conjunction with the low income tax offset as a targeted reduction of income tax for Australian residents.

Originally due to run over 4 years, in the 2020 federal budget phase 2 of the 3-phase 7-year income tax plan was brought forward. This effectively put an end date on LMITO of 30 June 2021.

In the 2021 federal budget it was announced that LMITO would be extended to the 2021-22 income year. Legislation to enact this change has been passed by both houses of parliament and will become law in the very near future.

The LMITO will provide an additional offset of up to $255 for individuals on a taxable income of $37,000 or less. Taxpayers up to $48,000 will get an increased LMITO up to the maximum amount of $1,080.

The maximum LMITO is available for Australian residents on incomes up to $90,000 and will tapers off to $0 for individuals with a taxable income of $126,000.

A "targeted" capital gains tax exemption relating to granny flat arrangements has passed through parliament and will become law.

The intention of the new legislation is to remove financial impediments when a granny flat arrangement is legally created. A formal arrangement would generally trigger CGT event D1, which often leads to informal arrangements. As family is usually involved, often it is these informal arrangements which can inevitably lead to financial and elder abuse.

nnouncement(17-Apr-2019) Consultation(3-Apr-2020) Introduced(13-May2020) Passed(17-Jun-2021) Royal Assent(23-Jun-2021) Date of effect(1-Jul-2020)

Announcement(6-Oct-2020) Consultation(29-Apr-2021) Introduced(26-May2021) Passed(24-Jun-2021) Royal Assent(29-Jun-2021) Date of effect(2-Oct-2020)

Announcement(8-May-2018) Consultation(11-May-2021) Introduced(26-May-2021) Passed(25-Jun-2021) Royal Assent(29-Jun-2021) Date of effect(1-Jul-2021)

Announcement(6-Oct-2020) Consultation(29-Apr-2021) Introduced(26-May-221) Passed(25-Jun-2021) Royal Assent(29-Jun-2021) Date of effect(1-Jul-2021)

2021 TAX UPDATES

Unpaid present entitlements and extension of repayments

Business support grant for 2021 greater Sydney lockdown

COVID-19 Disaster Payment increased for extended lockdown

Unpaid present entitlements (UPE) to private companies initially under an interest-only loan may be extended on final repayment date. The practical compliance guideline deals with a UPE that was put in an investment deal in accordance with PS LA 2010/4. If there is a balance to be repaid at the end of the investment period, it may become a new Div 7A loan.

30 June 2018 is the first year in which an interest-only loan at benchmark rates is due to be repaid after the issuing of PS LA 2010/4. That is, 7 years after the initial UPE was put on a sub-trust from the 30 June 2010 year.

The PCG has recently been updated to relate to arrangements ending in the 2017, 2018, 2019, 2020 or 2021 income years.

Family groups using this strategy may benefit from utilising this extension of time to repay the initial unpaid present entitlement from the 2009-10 income year.

An economic stimulus payment is due to be made for businesses under $50 million in annual turnover amidst the June-July 2021 greater Sydney COVID lockdown. The new business support payment will be available for businesses who can demonstrate a 30 per cent decline in turnover. It is understood that the support payment will be made through the ATO running balance account. An eligible entity, including not-for-profit entities, will receive payments of between $1,500 and $10,000 per week based on the level of their payroll. Non-employing sole traders will receive $1,000 per week. To receive the payment, an eligible entity will be required to maintain their number of employees held as at 13 July 2021. These temporary cash flow boosts are available where a business has been locked down by public health order for at least three weeks. The business is required to be based inside a Commonwealth Government declared hotspot.

Changes to the support payment for individuals who are unable to work during a COVID-19 lockdown were announced by the federal government on 13 July 2021.

The COVID-19 Disaster Payment was initially a payment of $325-500 a week for people who reside or work in a Commonwealth declared hotspot, depending on the hours of work a week lost by a person.

The enhanced support sees the payment rate increase to $375-600 for eligible periods due to a Commonwealth declared hotspot.

The announcement also extends the availability of the payment to:

impacted individuals who are still working at reduced hours, and

individuals outside Commonwealth declared hotspots in NSW,

provided they meet the updated criteria for the payment.

Like other support payments, it will be available through Services Australia. Further details on the payment and key eligibility dates can be accessed on the Services Australia website.

Announcement(19-Jul-2017) Consultation period(19-Jul-2017) Released(19-Jul-2017)

Announced: 13-Jul-2021 Updated: 14-Jul-2021

Announced: 3-Jun-2021 Updated: 21-Jul-2021

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