2021 Federal Budget Summary

The Budget papers include a number of measures that may impact you. On the personal taxation front, the proposed changes include an extension to the low and middle income earner tax offset and modernising the tax residency rules.

For businesses, there are proposed extensions to full expensing and loss carry back rules, as well as a number of employment boosting initiatives. The superannuation changes include a repeal of the work test, a reduction in the downsizer contribution minimum age, and changes to the self managed superannuation funds (SMSF) residency rules. There are also changes to not-for-profits, philanthropy, child care, and social security.

This summary provides coverage of the key issues of most interest to you.


While the economy is not out of the woods yet, things are looking a lot more promising than 12 months ago, and even from when the 2020-21 Budget was delivered in early October 2020.

The deficit for 2020-21 has been revised downwards to $161bn (from $213bn), while the deficit for 2021-22 if forecast to be $106bn.

The Budget priorities include:
• Getting Australians through COVID-19.
• Setting Australia up for the future by supporting employment and implementing reforms.
• Guaranteeing high quality and sustainable services for Australians.
• Building Australia’s resilience, security, and defence capability.


Personal Income Tax

• Retaining LAMITO for 2021-22 income year (Low & Middle Income Tax Offset).

• Modernising the individual tax residency rules. Any person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident.

Home Ownership

New Home Guarantee for single parents with dependants will have access to a new initiative that will provide an 18% deposit guarantee on a home purchase, This will allow eligible applicants to purchase a home with as little as a 2% deposit. 

• New Home Guarantee will release an additional 10,000 places for first home buyers looking to build or purchase a new home. This will allow eligible applications to secure their purchase on as little as a 5% deposit.

Business Owners

• Extensions to temporary full expensing, loss carry-back & JobTrainer until 30 June 2023

• Expansion of the wage subsidy.

• SME Recovery Loan Scheme. Support for SMEs with a range of secured & unsecured loans up to $5million. Qualifying SMEs include businesses, self-employed individuals & non-profit organisations, with an annual turnover up to $250million, who were recipients of the JobKeeper Payment between 4 January 2021 & 28 March 2021 or operated within a LGA affected by the March 2021 NSW floods.


• Repealing the work test for voluntary superannuation contributions. Individuals aged 67 to 74 years (inclusive) will be able to make or receive non-concessional or salary sacrifice superannuation contributions without meeting the work test, subject to existing caps. 

• Reducing the eligibility age for downsizer contributions from 65 years to 60 years. The downsizer contributions allows people to make a one-off, post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home.

• Relaxing residency requirements for SMSFs. The central control & management test safe harbour will extend from two to five years for SMSFs, and removing the active member text for both fund types. This measure will allow SMSF and SAF members to contribute to their superannuation fund whilst temporarily overseas, ensuring parity with members of large APRA-regulated funds. 

Not-For-Profits & Philanthropy

• Enhancing the transparency of income tax exemptions by way of the Government providing $1.9million capital funding in 2022-23 to the ATO to build an online system to enhance the transparency of income tax exemptions claimed by not-for-profit entities.

Child Care & Preschools

• Child Care Subsidy will increase from July 2022 for families with more than one child aged five and under in child care to a maximum subsidy of 95% of the fees paid for their second and subsequent children. The $10,560 cap on the Child Care Subsidy will also be removed.

• Other measures including $1.6bn over four years for preschool funding to lift attendance and school readiness and additional funding for other new initiatives. 

Social Security

• Increasing the flexibility of the pension loans scheme with $21.2million funding over four years.

• $1.1bn will be allocated to women’s safety measures that focus on preventing violence before it happens, delivering front line services, financial support to assist leaving violent relationships, greater data collection and monitoring and expanded response through the judicial system.

Aged Care

• Whole-of-government response to Royal Commission into Aged Care Quality & Safety with $17.7bn over 5 years to improve safety and quality and the availability of aged care services. A range of measures focusing on additional options, performance guidelines and industry training provisions will be included.

Many of the Budget announcements cannot take effect until relevant legislation has been passed. In addition, some initiatives may not commence until a later date, e.g., 1 July 2022

This Summary only contains brief details of the Budget announcements. The “devil will be in the detail” which will be available once relevant legislation is available.

This article if general information only and does not take into account your objectives, financial situation or needs. Before making any decisions you should seek independent financial, legal and taxation advice.

Information sourced and reproduced from Macquarie Bank Limited and Centrepoint Alliance Limited.