This year’s Federal Budget included tax cuts for individuals and businesses and a significant outlay on social services. Here is a summary of some of the measures to be aware of.
While there is no change to the marginal tax rates or the thresholds above which they apply, the low and middle-income tax offsets are being extended for another year. This tax rebate or offset is applied when lodging a tax return and will impact individuals with incomes up to $126,000 pa. The maximum rebate for an individual will be $1,080.
The low-income threshold above which Medicare levy has also been increased and backdated to 1 July 2020. The savings for individuals from this measure will be much more modest, being only a few dollars annually.
Overall, these changes remind employees that when considering the tax effectiveness they need to consider their marginal tax rates and any offsets that may apply when lodging their tax returns.
The Child Care Subsidy (CCS) rate is to be increased by 30% for second and subsequent children aged five and under, up to a maximum of 95% (previously 85%) for these children. This measure is set to commence from July 2022. The CCS cap of $10,560 per child per year will be removed from 1 July 2022.
When child care is salary packaged, the CCS is no longer available as, technically, the employer is paying the child care fees. We strongly recommend employees consider this when comparing the full net cost of each option before determining the best one for them.
The Budget confirmed the planned increase in the rate of compulsory employer superannuation contributions from 9.5% to 10.0%. This increase came into effect on 1 July 2021, while the annual cap for concessional contributions also increased from $25,000 to $27,500.
The Government also announced the removal of the $450 monthly income threshold below which employers do not need to pay superannuation. This change is still subject to the legislation passing, but it is proposed to take effect from 1 July 2022.