At 7:30pm tonight, Josh Frydenberg delivered his third budget announcing that “Australia is coming back! In the face of a once in a century pandemic, the Australian spirit has shone through. Doctors and nurses in the frontline, teachers in virtual classrooms, and businesses big and small keeping the economy moving. Team Australia at its best… a nation to be proud of.”

The Treasurer said that Australia is ahead of any major economy, that the Australian economy has only contracted by 2.5%, and that tonight’s budget is the Morrison Government’s plan to secure Australia’s economic recovery.

Key Forecasts

• $106.6B deficit for 2021-22, $99.3B deficit for 2022-23, $79.5B deficit for 2023-24, and $57B deficit for 2024-25;
• $729B net debt for 2021-22, $835B net debt for 2022-23, $920.4B net debt for 2023-24, and $980.6B net debt for 2024-25;
• 4.25% GDP growth is expected for 2021-22, 2.5% GDP growth is expected for 2022-23, 2.25% GDP growth is expected for 2023-24, and 2.5% GDP growth is expected for 2024-25;
• 5% unemployment is expected for 2021-22, 4.75% for 2022-23, 4.5% for 2023-24, and 4.5% for 2024-25.

Key Changes for Business

The treasurer stated that “small and family businesses are the engine room of our economy. As they strive to recover, we need the tax system to work for them not against them. Under the coalition, small business will always be stronger.”

The Treasurer announced the following tax and economic benefits for business in this budget:

• In the 2021 budget, the Government announced a new measure to enable all businesses with annual turnovers up to $5 billion to deduct the full cost of eligible depreciating assets of any value in the year they are first used or installed ready for use. This measure, known as “Temporary full expensing”, will now be extended by one year and will end on 30 June 2023;
• In the 2021 budget, the Government announced a new measure known as “Temporary loss carry-back”. This allows companies with annual turnovers up to $5 billion to offset losses incurred in FY2020, FY2021, and FY2022 against profits made in FY2019 or later years. This will now be extended by one year to include losses for the year ending 30 June 2023. Companies can claim these tax refunds when lodging their FY2021, FY2022, and FY2023 tax returns;
• The Government has announced a new measure called “Patent Box”. From 1 July 2022, income derived from Australian medical and biotech patents will be taxed at a concessional corporate tax rate of 17%. This will apply to granted patents applied for after the budget announcement;
• The Government is supporting Australian companies to attract and retain talent by removing the cessation of employment taxing point for tax-deferred employee share schemes. This means that employees who are eligible to retain unvested shares when employment ceases, will not be taxed at that point in time. This measure will apply to ESS interests issued on or after 1 July following Royal Assent.
• In 2021, the Government introduced the “SME Guarantee Scheme” by providing lenders with a 50% guarantee on unsecured loans up to $1m with a maximum term of up to 5 years. Tonight, the Government has announced the “SME Recovery Loan Scheme” which builds on the SME guarantee scheme and increases the guarantee to 80%, the maximum loan size to $5m, and the maximum loan term to 10 years. SMEs with a turnover up to $250m that were recipients of the Jobkeeper Payment between 4 January 2021 and 28 March 2021 are eligible for these loans.

Key Changes for Individuals

The Treasurer said that “Australia’s economic recovery is well underway, and we must keep the momentum going.”

The following income tax changes for individuals were announced:

• The low and middle income tax offset of $1,080 will be extended by one year until 30 June 2022. This full $1,080 tax offset is available to individuals earning between $48k and $90k. A partial offset is available to individuals earning below $48k and to individuals earning between $90k and $126k;
• The stage 3 tax cuts for individuals, which include lifting the top tax bracket from $180k to $200k and eliminating the 37% tax rate are still scheduled for 2024;
• The individual tax residency rules, which determine when an individual is tax resident of Australia, will be replaced by a new framework from 1 July following Royal Assent. The primary test will be a simple test making individuals, who have been physically present in Australia for 183 days or more in an income year, tax residents of Australia;
• The Government will remove the $10,560 cap on the childcare subsidy from 1 July 2022 and will increase the subsidy by 30% to a maximum of 95% of childcare fees paid for second and subsequent children;
• The Government will implement the following new initiatives, providing relief to first home buyers:
  • A 5% deposit scheme for 10,000 first-home buyers with the Government guaranteeing up to 15% of the loan;
  • A 2% deposit scheme for single parents buying their first home, with the Government guaranteeing 18% of the loan;
  • The super saver scheme, which enables first-home buyers to save for a deposit in superannuation, has been changed to allow first-home buyers to release $50k from superannuation for a deposit (up from $30k).

Key Changes for Superannuation

The Treasurer said that “under the coalition Government, Australian seniors will always have control over their money” and announced the following changes in relation to superannuation:

• The superannuation work test, which is required to be met by individuals aged 67 to 74 when making superannuation contributions, will no longer apply from 1 July 2022 in relation to non-concessional superannuation contributions. Individuals aged 67 to 74 will also be able to bring forward non-concessional superannuation contributions, subject to meeting the relevant eligibility criteria;
• From 1 July 2022, the minimum age for the downsizer superannuation contribution will be reduced from 65 to 60. This allows downsizers to make a one-off after-tax contribution of $300,000 per person or $600,000 per couple when selling a family home;
• The $450 monthly salary threshold for compulsory superannuation contributions will be abolished, which will allow more part-time and casual employees to receive superannuation contributions from their employers.