The federal budget 2021–22 was handed down by the Treasurer, the Hon Josh Frydenberg MP, on 11 May 2021. This article considers the key issues as we wait for the legislative amendments to give effect to the budget measures.
At the time JobKeeper was announced on 30 March 2020, I described the scheme as akin to a pot of boiling water on the stove (representing the economy) where the gas levels cannot be maintained (due to COVID-19 lockdowns). Rather than turn the gas off, it was reduced to a low simmer. This would allow the pot to return to the boil more quickly than if the water was allowed to go stone cold.
It worked … the Australian economy has rebounded faster and stronger than expected, as evidenced by the latest budget numbers. For all its minor design flaws, JobKeeper kept businesses afloat and employees in jobs.
While an eye-watering deficit of $106.6 billion has been forecast for 2021–22, the budget measures have been positively received by many observers, containing plenty of good news for most. This budget was undoubtedly prepared with a forthcoming Federal election in mind (expected to be held no later than 21 May 2022) and against the backdrop of an electorate weary from the COVID-19 pandemic.
As I reflect on the package of key tax and superannuation measures announced this year, it is apparent that some of the measures can be classified into one of the following three categories:
measures which are long overdue and constitute a ‘clean up’;
measures which are welcome but could go further; and
measures which are difficult to fault for their intent or purpose, but which require further consultation.
Letting go of LMITO
Before I do so, I’d like to comment on the highly visible Low and Middle Income tax offset (LMITO), thanks to extensive media coverage. If anyone is thinking the LMITO should be further extended (beyond 2021–22) or retained permanently, remember that it was baked into Stage 2 of the Personal Income Tax Plan. Stage 2 was originally legislated to apply from 1 July 2022 which would have subsumed the limited life LMITO.
However, last year’s budget brought forward Stage 2 by two years and unexpectedly extended the LMITO by 12 months to 2020–21. The LMITO’s life will be further extended to 2021–22, meaning it will endure for what will now be four years, as originally intended in the Personal Income Tax Plan, from 2018–19 to 2021–22.
Importantly, the nexus between the LMITO and the Stage 2 tax cuts has been decoupled. The tax cuts package was designed before COVID-19. The continuation of the LMITO for an additional two years has morphed into an economic stimulus measure. Its proposed removal after 2021–22 will visibly cut into family budgets as its recipients have become accustomed to the offset and come to rely on it. Perhaps the ‘bonus’ two years of the LMITO could have been rebadged (even renamed) by the government as a stimulus measure, as its subsumption by the Stage 2 tax cuts on 1 July 2020 seems to have gone unnoticed by most taxpayers and the media.
Long overdue measures
The proposed removal of the exclusion of the first $250 of deductions for self-education expenses (not likely before 1 July 2022) is a sensible measure. This annoying rule — a legacy of the concessional deduction of the 1960s, the $250 rebate of the 1970s and the removal of that rebate in the early 1980s — imposes an unnecessary compliance burden on taxpayers.
The proposed removal of the $450 monthly income threshold for superannuation guarantee purposes (not likely before 1 July 2022) is a sensible and long overdue change, particularly in this digital age of electronic payments and reporting. This measure is expected to benefit 300,000 low income employees, of which 63 per cent are women.
The proposed removal of the active member test for SMSFs and small APRA funds (not likely before 1 July 2022) is also a long overdue measure. This sensible change will allow those temporarily stranded offshore due to our international border closure to continue to contribute to their own funds without having to set up a separate superannuation account managed by a large fund. The increase in the period under the temporary absence rule for fund trustees from two years to five years is also sensible, particularly for those trustees whose temporary absences overseas have been unexpectedly extended by COVID-19.
Welcome measures that could go further
The proposed removal of the work test for those aged 67–74 making voluntary superannuation contributions (not likely before 1 July 2022) is a pleasing measure but falls short. The work test will be removed for those making voluntary non-concessional contributions or concessional contributions under a salary sacrifice arrangement but will remain for those aged 67–74 who cannot access salary sacrifice arrangements or earn solely investment income and seek to make personal deductible contributions. At a time when all efforts should be made to encourage superannuation savings, it is curious why this unnecessary restriction on the making of some concessional contributions remains.
Temporary full expensing and loss carry back are economic stimulus measures from last year’s budget. These will be extended for a further 12 months, to 30 June 2023 and 2022–23 respectively. While this is welcome, the annual extension and/or expansion of the asset write-off mechanism (in one form or another since 12 May 2015), in particular, is inefficient and confusing for taxpayers and practitioners. It is high time the government decides on the appropriate asset and business turnover settings and makes these mechanisms a permanent feature of the law, for once and for all.
The introduction of a patent box — a concessional corporate tax rate of 17 per cent on income derived from Australian patents in the medical and biotechnology sectors — is an innovative response from the government. There is enormous scope to expand the concept to other industries (noting that the clean energy sector has already been flagged).
Awaiting further detail
The changes to the corporate tax residency rules — announced in last year’s budget — will now be sensibly extended to include trusts and corporate limited partnerships. However, we await further detail on the new ‘significant economic connection to Australia’ test for companies incorporated outside Australia announced in last year’s budget.
The introduction of a new individual tax residency ‘bright line test’ should, theoretically, replace the current ‘resides test’ and the three statutory tests. However, the proposed secondary ‘Factor test’ may present new challenges for those who fail the primary ‘bright line test’, particularly when taxpayers try to navigate the ‘Australian economic connections’ factor. It is hoped that the government will look to consult further with the profession before finalising its policy position on the detail of this measure. We need to be careful we are not effectively replacing one set of complex tests with another, without gaining any ground.
Other significant measures
Other notable measures announced in the budget include the following:
the eligible age for making downsizer superannuation contributions will be reduced from 65 to 60 (not likely before 1 July 2022);
the maximum releasable amount under the First Home Super Saver Scheme will be increased from $30,000 to $50,000 (not likely before 1 July 2022);
taxpayers will be allowed to self-assess the effective life of intangible assets rather than being required to use the statutory effective lives set out in s 40-95(7) of the ITAA 1997 (but not until 1 July 2023);
the cessation of employment will be removed as a taxing point for tax deferred employee share scheme interests; and
small business entities (aggregated turnover of less than $10 million) will be provided with the ability to apply to the Small Business Taxation Division of the Administrative Appeals Tribunal (AAT) to pause or modify ATO debt recovery action until the underlying dispute is resolved by the AAT, rather than applying through the courts.
The start date of the measures
The government released the budget for 2021–22 on 11 May 2021, yet none of the key tax and superannuation measures commence on 1 July 2021 (noting the continuation of temporary full expensing and loss carry back until 2023). Most of the measures start on the first 1 July following Royal Asset of the enabling legislation. While this acknowledges the reality of the inevitable passage of time between the date of announcement and the date of Royal Assent (allowing time for the measures to be passed by Parliament), it means that, ironically, most of the tax and superannuation measures contained in the federal budget 2021–22 will not commence until 1 July 2022 at the earliest.
This timing places the commencement of these measures beyond the next Federal election. If the measures are enacted before then, any changes could only be effected by further legislative amendment. If any of the measures are still unenacted when the Parliament is dissolved and:
the Coalition is re-elected — presumably the policies would be retained and any unenacted measures contained in bills lapsing on the dissolution of the Parliament would be reintroduced;
the Opposition forms government — it would be a matter for the Australian Labor Party to set out their policies and confirm whether the Coalition’s budget measures will be adopted.
As usual, we shall wait and see what transpires.
A final word on tax reform…
The budget did not contain any commitment to a holistic tax reform agenda. We still hope that the government will commit to tax reform to improve the efficiency and equity, and reduce the complexity, of the tax and superannuation system.
The government could take up opportunities set out in The Tax Institute’s pre-budget submission on expediting dispute resolution and dealing with some of the penalty issues raised in our submission, including the draconian 200 per cent penalty imposed under the superannuation guarantee regime for failure to lodge an SG statement.
Robyn Jacobson The Tax Institute 28 May 2021 accountantsdaily.com.au
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Chris is the Managing Director of the Firm who established the practice in August 1994 and has been responsible for its growth and development since that time.
Chris has over 35-years experience in the Chartered Accountancy profession, predominantly spent in small to medium sized firms, advising both small business and individuals in areas such as taxation and accounting as well as business restructuring and superannuation advice.
Chris is active in the development of young accountants both in mentoring cadets at the Firm and lecturing in taxation for the CA Program for the Institute of Chartered Accountants.
1980 – Commenced employment and part time university studies
1985 – Graduated Bachelor of Business from University of Technology, Sydney
1986 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
1988 – Registered as a Registered Company Auditor
1994 – Established Wybenga & Partners (formerly known as Farrar & Wybenga)
Dianne is responsible for the day-to-day operations and administration of the practice.
Dianne has over 25-years Chartered Accountancy experience and has significant expertise in providing advice and solutions to high-net-worth individuals and their associated entities. Dianne also has considerable knowledge in the areas of taxation, business services, superannuation, and compliance.
Dianne is active in promoting gender equality in the industry through various programs and mentoring opportunities. Dianne is also committed to the development of young accountants and donates considerable time to sharing her expertise.
1992 – Graduated Bachelor of Business from University of Technology, Sydney
1993 – Commenced employment in acounting profession
1996 – Commenced career with Wybenga & Partners
1997 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
2002 – Appointed as Director of Wybenga & Partners
Roger is responsible for the HR aspect of the Firm, cultivating the culture, and maintaining the highly social environment we pride ourselves on.
Roger has over 30-years in the Chartered Accountancy profession and significant expertise in providing advice and solutions to small businesses and high-net-worth individuals. He also has extensive experience in the areas of Self-Managed Superannuation Funds and retirement strategies.
Roger is active in the development of young accountants both in mentoring cadets at the firm and lecturing in taxation for the CA Program for the Institute of Chartered Accountants.
1985 – Commenced employment and part time university studies
1990 – Graduated Bachelor of Business from University of Technology, Sydney
1992 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
1998 – Commenced career with Wybenga & Partners
2002 – Appointed as Director of Wybenga & Partners
B.Sc, M.Com, CA
Tess has over 15-years experience in Chartered Firms and in this time has had a broad range of experience in superannuation, taxation, and business services. In particular, Tess has had significant experience in MYOB and assisting clients in day-to-day bookkeeping activities and periodic reporting.
Tess is responsible for the Firm’s training and development needs.
Tess is active in promoting gender equality in the industry through various programs and mentoring opportunities. Tess is also committed to the development of young accountants and donates considerable time to sharing her expertise.
2001 – Commenced employment with Wybenga & Partners and part-time accountancy studies
2004 – Graduated Masters of Commerce from the University of New South Wales
2005 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
2007 – Promoted to Manager at Wybenga & Partners
2012 – Appointed as Associate Director
2016 – Appointed as Director of Wybenga & Partners
B.Bus, B.Sc, CA
Adam has over 13-years experience in Chartered Firms and in this time has had a broad range of experience in superannuation, taxation, and business services. In particular, Adam has had significant experience in MYOB and assisting clients with periodic management reporting.
Adam is responsible for the implementation of technology in the Firm and sourcing new areas of innovation and efficiency.
Adam is active in the development of young accountants and donates considerable time to sharing his expertise.
2005 – Commenced employment with Wybenga & Partners and part-time Accountancy Studies
2005 – Graduated Bachelor of Science from the University of Western Sydney
2007 – Graduated Bachelor of Business from the University of Western Sydney
2010 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
2010 – Promoted to Manager at Wybenga & Partners
2012 – Appointed as Associate Director
2016 – Appointed as Director of Wybenga & Partners
Each year we offer several school leavers or undergraduates the opportunity of beginning their career with us via an Accounting Cadetship. If you are interested in pursuing a career in accounting please read the information below.
What is an Accounting Cadetship? An Accounting Cadetship enables you to commence your career whilst attaining the necessary university qualifications by studying part-time.
How does it work? Generally, our cadets complete a Bachelor of Commerce (BCom) or Bachelor of Business (BBus) degree at the University of New South Wales, the University of Technology Sydney, Macquarie University, or the University of Western Sydney.
The firm provides 3 hours paid study leave per week to attend University. This can either be taken at the one time or broken between days depending on the individual’s requirements. In addition, the Firm provides paid study leave for both mid-semester and end-of-year exams.
We take the work life balance very seriously at Wybenga & Partners and our cadets are encouraged to have a fulfilling life outside the office. A typical day will have you arriving at the office at around 8.30am with most days concluding at 5.30pm.
What are the benefits of an Accounting Cadetship with Wybenga & Partners? Our cadets benefit from the following:
Career path – on completion of their degree our cadets have significant practical experience which will assist them in advancing their careers
Work helps your studies – by working full-time our cadets are able to apply their practical knowledge in the university subjects
Camaraderie with other cadets – the Firm has a number of cadets at various stages of their career
Mentoring – cadets are paired with a senior staff member who oversees their progress and training both at work and with their studies
Communication and feedback – the Firm has an open door policy which enables all cadets to interact with all members of staff including Directors
Culture – the Firm promotes a friendly social culture with a number of functions throughout the year
Modern environment – including ‘socialising’ areas such as pool table and break out area
Training – ongoing support and technical training. We also provide internal and external training on a monthly basis
Remuneration – working full-time provides a market salary and independence with salaries being reviewed every 6-months
What happens when I complete my degree? The completion of your degree is the first step of what we hope to be a long and successful career with us. The next step is the commencement of your CA Program with the Institute of Chartered Accountants Australia and New Zealand whilst at the same time continuing your employment with us.
A number of cadets have progressed to Seniors, Managers, and Directors within the firm.
Who should apply? Current Year 12 students or first/second year University Students who:
want to commence their career in accountancy;
are due to commence or are currently completing a part-time business or commerce degree at university with an accounting major;
want to gain valuable hands-on experience while completing their qualifications;
are looking for a friendly working environment;
are team players who display initiative;
have a commitment to self-development;
possess excellent personal presentation and communication skills; and
are motivated and mature minded.
How do I apply for an Accounting Cadetship? To apply for a Cadetship position at Wybenga & Partners send us your details. Please also include in your covering letter why you wish to do a cadetship, include relevant qualities you possess, main interests / achievements, and any previous employment.
Interested candidates should initially forward a resume/covering letter of no more than 3-pages. Please provide full details of contact information (telephone or e-mail).
What if I have more questions? For further information about our Cadetship program, please send your enquiry to email@example.com
Wybenga & Partners offers a stimulating work environment giving you the opportunity to develop your future success.
Wybenga & Partners recognises and promotes that there is more to life than work. We know that your needs change and we provide support to balance your work, academic and lifestyle pursuits.
We welcome enquires from trained accountants regarding a career with Wybenga & Partners. Please email us your details to firstname.lastname@example.org