With the new financial year just started we thought it would be a timely reminder to provide a summary of some of the key tax changes and ongoing measures in place that you should be aware of.
- Superannuation guarantee increase to 10%
The Superannuation Guarantee rate has increased from 9.5% to 10% with effect from 1 July 2021 with further increases of 0.5% per year to come from 1 July 2022 until it reaches 12% from 1 July 2025 onwards.
The SG rate increases were not affected by the 2021-22 Federal Budget. Accordingly, from 1 July 2021 employers will need to update their payroll settings to reflect the 0.5% increase in the SG rate.
Employers also need to be aware that they cannot use an employee’s salary sacrifice contributions to account for the extra 0.5% of SG. Contributions made on behalf of an employee under a salary sacrifice arrangement are not treated as employer contributions which reduce an employer’s charge percentage.
- Maximum super contribution base and opt-out for multiple employers
The increase in the SG rate to 10% from 1 July 2021 means the maximum super contribution base has increased from 1 July 2021 to $58,920 per quarter ($235,680 per annum), up from $57,090 per quarter ($228,360 per annum).
The increase in the SG rate to 10% from 1 July 2021 also means that the SG opt-out income threshold will increase to $275,000 from 1 July 2021 (up from $263,157). This allows high-income earners with multiple employers to opt-out of the SG regime in respect of an employer to avoid unintentionally breaching the concessional contributions cap (see below).
- Concessional contributions cap increase
From 1 July 2021 the annual concessional contributions cap (which effectively limits the annual concessional super contributions) will increase from $25,000 to $27,500. Employers should remind employees that concessional contributions made beyond this amount may attract higher tax rates and an excess contributions charge.
- Bring forward concessional contributions
These rules have applied from 1 July 2019 and allow you to make extra concessional contributions, above the general concessional contributions cap. The carry-forward arrangements involve accessing unused concessional cap amounts from previous years. An unused cap amount occurs when the concessional contributions you made in a financial year were less than your general concessional contributions cap.
Note these rules only apply where your superannuation balance is less than $500,000 as at 1 July in the preceding financial year.
- Reduction in company tax rate to 25%
Companies that have an aggregated annual turnover of less than $50 million and whose business income is at least 80% of their total revenue will have a reduced corporate tax rate of 25% (down from 26% in 2021) for year commencing 1 July 2021. Note also that the company’s franking rate will also reduce to the same amount.
- Loss carry back rules continue to apply
Your company may be eligible to reclaim company tax paid in prior years if the company;
- made tax lossesin the 2019–20, 2020–21 or 2021–22 income years; and
- had an income tax liabilityfor the 2018–19, 2019–20 or 2020–21 income years; and
- has met its income tax obligations.
Note that the amount refundable will be limited to the balance of the company’s franking account (i.e. company tax previously paid).
- Full expensing of assets
For businesses with an aggregated turnover of less than $50 million, temporary full expensing also applies to the business portion of eligible new and second-hand depreciating assets.
Businesses can also immediately deduct the business portion of the cost of improvements to eligible depreciating assets (and to assets acquired before 7.30pm AEDT on 6 October 2020 that would otherwise be eligible assets) if those costs are incurred between 7.30pm AEDT on 6 October 2020 and 30 June 2022.
Note for businesses with turnover of greater than $50 million and less than $5 billion the measures only apply to new depreciating assets.
If you have any questions concerning the application of these new measures, please do not hesitate to contact us on (07) 3910 5675 or [email protected].