The 2021 Federal Budget (delivered on 11 May 2021) is designed to support the next phase of Australia’s business-led economic recovery. As an indicator of this recovery, after increasing to 6.9 per cent in 2019-20, unemployment is expected to fall to 5.5 per cent this financial year and to 4.5 per cent by the end of the forward estimates.
Of interest to payroll teams, the:
- superannuation guarantee will increase as planned to 10 percent on July 1, 2021
- low and middle-income tax offset (LMITO) is retained in 2021-22
- 50 percent wage subsidy for new apprentices and trainees is extended to 31 March 2022
- $450 per month minimum salary or wages threshold ends on July 1, 2022.
In addition to the tax measures, certain industries and sectors of the economy have been targeted with billions of dollars in additional funding, including: major transport infrastructure, preschools, aged care, disability support, mental health, social support and defence.
Of course, all the measures announced by the Government on 11 May and covered in this blog need to be enacted by Parliament before it can take effect.
Improving service through technology
The 2021-22 Federal Budget puts forward investment of almost $1.2 billion in Australia’s digital future through a comprehensive Digital Economic Strategy. This includes investment in growing digital skills and digital safety and security.
The budget includes $10 million over four years for a regulatory technology solution that assists employers to interpret and comply with modern awards. The Government will provide $15.3 million in funding to increase awareness of the value of electronic invoicing (e-invoicing) for all businesses, which will be mandatory for all Commonwealth agencies from 1 July 2022.
Wage subsidies continue with the extension of the existing 50 per cent wage subsidy program for new apprentices and trainees employed from 5 October 2020 to 31 March 2022. The measure will uncap the number of eligible places and increase the duration of the subsidy to 12 months from the date an apprentice or trainee commences with their employer.
Income tax and the super guaranteeThis year, the Government has not announced any change to personal income tax rates or thresholds, which remain unchanged until the commencement of the currently legislated Stage 3 of the Personal Income Tax Plan which is due to commence from 1 July 2024. When Stage 3 is implemented in 2024‑25, around 95 per cent of taxpayers will face a marginal tax rate of 30 per cent or less.
| Thresholds for tax years ended 30 June 2021 to 30 June 2024 | Thresholds from 1 July 2024 | |
| Rate (%) | Income range ($) | Income range ($) |
| Tax free | 0 – 18,200 | 0 – 18,200 |
| 19 | 18,201 – 45,000 | 18,201 – 45,000 |
| 30 | N/A | 45,001 – 200,000 |
| 32.5 | 45,001 – 120,000 | N/A |
| 37 | 120,001 – 180,000 | N/A |
| 45 | > 180,000 | > 200,000 |
The low and middle income tax offset (LMITO) is being retained in 2021-22, and should be worth up to $1,080 for individuals or up to $2,160 for couples.
No changes were announced to the Superannuation Guarantee rate in the Budget. Consequently, from 1 July 2021, the prescribed SG rate will increase to ten per cent (from the current rate of 9.5 per cent).
Pending the legislation passing parliament, the Government is intending to remove the existing $450 per month minimum salary or wages threshold (which resulted in low income employees not receiving any superannuation guarantee support), from 1 July 2022.
A decade of deficits
The total cost of the Government’s COVID-19 economic support package is now nearly $300 billion. The Budget’s underlying cash balance for 2020-21 is expected to be a deficit of $161 billion. The ABC forecasts a decade of deficits and debt that is set to peak around $1 trillion in 2025.
Learn more about how Aurion software integrates legislative changes and keeps you compliant: see our blog – Aurion Prepares For STP-2 and subscribe to our mailing list today.
