What changed on 1 July 2021? Here are 11 changes that might affect you.
What Changed on 1 July 2021
No rock the boat changes, but still important to know. In this episode we discuss 11 changes with Nathan Watt of Watson & Watt in Brisbane.
Here is what we learned but please listen in as Nathan explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
1 – STP compulsory for everybody
Until now small (19 or fewer staff) and closely-held businesses (e.g., directors of family companies, wages for family employees) enjoyed an extension until 30 June 2021. But this is now over. From 1 July STP is compulsory for everybody. No further extensions.
For employers with closely held employees, there are three ways to report STP:
1 – reporting actual payments in real time,
2 – reporting actual payments quarterly or
3 – reporting a reasonable estimate quarterly.
2 – Change in Company Tax Rates
Company tax rate decreases from 26% to 25%.
Company tax is only a temporary tax unless you are a foreign resident. So if you are an Australian resident the lower company tax rate helps your cash flow at the start, but there will be a 1% higher top up tax when you pay dividends.
3 – Removal of simplified method of working from home
The simplified method finished on 30 June 2021. So you can still use it for your 2021 tax return, but after that no more.
4 – Early engagement service
The ATO’s early engagement service for inbound investors is scheduled to start from 1 July 2021. It is to inform potential inbound investors newly investing in Australia of their Australian tax obligations.
5 – Beer and wine excise
From 1 July the beer excise tax rebate will increase from $100k to $350k for brewers and distillers to align with the producer rebate for wine producers. So brewers can now claim a rebate of 60% of excise up to $350k.
Apparently before this change, Australia had one of the highest beer taxes in the world. And I have been told that excise tax is the single largest component of the cost of making a litre of beer.
Highly competitive market. Brewer numbers grew by 15% in 2020 (600+ brewers in Australia), while the beer market contracted by 1.7%.
6 – Increase of SG from 9.5% to 10%
The Superannuation Guarantee (SG) rate as currently legislated will increase 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.
And after that the rate will increase each year:
July 2022 – 30 June 2023 10.5%
1 July 2023 – 30 June 2024 11%
1 July 2024 – 30 June 2025 11.5%
1 July 2025 – 30 June 2026 12%
So liaise with your clients whether any packaged salaries need to be adjusted to absorb this increase.
7 – Increase of Concessional Contribution Cap to $27,500
The concessional contribution cap will increase from $25,000 to $27,500.
8 – Increase of Non – Concessional Contribution Cap to $110,000
The non-concessional cap will increase from $100,000 to $110,000.
9 – Increase of TBC to $1.7m
From 1 July 2021, the general TBC will increase from $1.6m to $1.7m
10 – Individual TBC
The TBC is no longer just one cap that applies to everybody.
From 1 July 2021, every individual will have their own personal TBC of between $1.6 and $1.7 million, depending on their circumstances.
If you are 100% in accumulation, your TBC increases to $1.7m.
If you are in pension and you have maxed out your TBC, then your TBC doesn’t change but stays at 1.6m.
And if you are in pension mode but haven’t maxed out your TBC, then only your unused cap gets adjusted. So if your pension balance is $1.2m, then only the unused cap of $400,000 gets adjusted.
$400,000 is a quarter of $1.6m. So you only get a quarter of the increase in TBC. The increase is $100,000, a quarter of that is $25,000. So your TBC increases from $1.6m by $25k to $1.625.
You don’t need to calculate your TBC. The ATO will do that for you.
11 – Increase of threshold for Spouse and Government Contribution
Caps for Spouse Contribution and Government Co-Contribution increased on 1 July 2021 to $1.7m.
What didn’t change on 1 July 2021
12 – Instant asset write off
You can still claim the instant asset write off if your aggregated turnover is less than $5b. The measure has been extended to 30 June 2022.
13 – Backing Business Incentive
You can still claim the backing business incentive if your turnover exceeds $5b. The measure has been extended to 30 June 2022.
14 – Extension of 50% reduced minimum pension payments
You can still halve your minimum pension payments. The measure has been extended to 30 June 2022.
Age Default minimum 2019-20, 2020-21
drawdown rates & 2021-22 reduced rates
Under 65 4% 2%
65-74 5% 2.5%
75-79 6% 3%
80-84 7% 3.5%
85-89 9% 4.5%
90-94 11% 5.5%
95 or more 14% 7%
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Pre-CGT Shares and Company Assets
Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.