Budget updates for 2021

Budget overview

The 2020/21 budget focus is:

  • to get those that aren’t working due to the COVID-19 pandemic back to work

  • get households spending again

  • support business investment, employment, and cashflow

  • following through on existing COVID-19 pandemic initiatives already implemented at a cost of $299 billion in overall support.

Many of the fiscal measures announced are temporary and flowing through to the economy over the next two financial years. With minimal focus on long term spending and reform except for some changes to superannuation for recommendations from the Royal Commission’s Report.



Effective 1 July 2021, the Government has announced a number of superannuation measures in the Your Future, Your Super package designed to improve the superannuation system and enhance competitiveness – in particular, addressing fees and underperformance of superannuation funds.

The Government estimates that the following measures will benefit Australians by $17.9 billion over the next 10 years:

  • having superannuation follow members and reduce account numbers
  • making it easier to choose a better fund with comparisons
  • holding funds to account for underperformance against benchmarks
  • increasing transparency and accountability.



New tax tables resulting in lower tax withheld from your wages. Note that this does not mean you should expect a higher refund than the previous year as you should have already received additional wages during the year.

Table 1: Current and revised marginal tax rates 2020/21

Source: Commonwealth of Australia 2020

Source: Commonwealth of Australia 2020


Eligibility for Low Income Tax Offset (LITO) increase 

Effective date (legislated) – 1 July 2020

LITO will increase from $445 to $700 (originally legislated to increase from 1 July 2022).

The boosted LITO will reduce at the rate of 5 cents per 1 dollar of taxable income between $37,500 and $45,000 and 1.5 cents per 1 dollar of taxable income between $45,000 and $66,667.

Table 2: Eligibility for LITO

Source: Commonwealth of Australia 2020

Source: Commonwealth of Australia 2020


Low and Middle Income Tax Offset (LMITO)

LMITO will be retained for the 2020/21 only.

This offers a benefit of $225 for those earning up to $37,000 and does not reduce your Medicare levy.

For individuals earning between $37,000 and $48,000 the offset increases at 7.5 cents per 1 dollar above $37,000 to a maximum offset of $1,080.

Those earning between $48,000 and $90,000 are eligible for the maximum LMITO benefit of $1,080.

For income earnt above $90,000 the offset phases out at a rate of 3 cents per 1 dollar and is not available when taxable income exceeds $126,000.(The Commonwealth of Australia 2020, p. 18).


Medicare levy thresholds increase for low income earners 

Effective date (legislated) – 1 July 2019

The Government will increase the Medicare levy low-income thresholds for singles, families, and pensioners and seniors from the 2019/20 income year, as illustrated in Table 3.

Table 3: Medicare levy thresholds
*Additional threshold for each dependent child increases from $3,471 (2018/19) to $3,533 (2019/20)Source: Commonwealth of Australia 2020, p. 188 

*Additional threshold for each dependent child increases from $3,471 (2018/19) to $3,533 (2019/20)

Source: Commonwealth of Australia 2020, p. 188


Increase to the small business entity turnover threshold

Effective date (legislated): Staggered from 1 July 2020

Access to a range of small business tax concessions will be expanded by the Government, due to increasing the small business entity turnover threshold for these concessions from $10 million to $50 million.

Businesses with an aggregated turnover between $10 million and $50 million will have access to an additional 10 small business tax concessions in three phases:

  1. 1 July 2020 certain startup and prepaid exepnses allowed to deduct from;
  2. from 1 April 2021 FBT exemptions for Laptops and parking;
  3. 1 July 2021 simplified trading stock, PAYG, excise duty, and other changes.

The intent of these changes is to reduced red tape for around 20,000 businesses.


Temporary full expensing of capital assets (JobMaker Plan)

Effective date (legislated): 7:30 pm, 6 October 2020

The Government will allow businesses with turnover less than $5 billion to deduct the full cost of eligible depreciable assets of any value in the year they are installed or first used from 7:30 pm, 6 October 2020.

Full expensing will apply to new depreciable assets and the cost of improvements to existing eligible assets.

For second hand assets, however, full expensing is only available to small and medium size businesses with aggregate turnover less than $50 million.


Temporary loss carry-back (JobMaker Plan)

Effective date: From 2019/20

To support cashflow and allow businesses to access their losses earlier, the Government will allow eligible businesses (aggregate turnover less than $5 billion) to carry back tax losses from the 2019/20, 2020/21 or 2021/22 income years to offset profits previously taxed in 2018-19 or later income years.

Applying a tax loss against taxed profit from a previous year, will generate a refundable tax offset in the year the loss was made. The tax refund is to be limited so that the amount carried back does not exceed the earlier taxed profits and does not generate a franking account deficit.

The tax refund will be available by eligible business when they lodge their 2020/21 and 2021/22 tax returns.

Under current rules tax losses can only be carried forward to offset profits in future years and this can continue unless the business elects to carry back losses announced under this measure


JobMaker hiring credit

Effective date: 7 October 2020

The Government will pay a hiring credit for 12 months to eligible employers for each new eligible employee to the value of $100 (for those age 30 to 35) or $200 (for those age 16 to 29). This will be paid quarterly in arrears, with eligible employees required to work a minimum of 20 hours per week and in receipt or have been in receipt of JobSeeker Payment, Youth Allowance (other) or Parenting Payment for at least one month out of the three months prior to when they are hired. The hiring credit applies to new roles created up to 6 October 2021.

For businesses to be eligible they must demonstrate an increase in overall employee headcount and payroll for each additional position created.


Boosting apprenticeship wage subsidy 

Effective date (proposed): 5 October 2020 to 30 September 2021

Businesses of any size who take on a new apprentice will be eligible for a 50% wage subsidy, up to $7,000 per quarter. This incentive will particularly support school leavers and those workers displaced during the COVID-19 downturn.  This subsidy is capped at 100,000 places.

The commencement of the Incentives for Australian Apprenticeships Program from 1 January 2021 to 1 July 2021 will be delayed. This will minimise disruption to employers and apprentices and continue support for them through the existing Australian Apprenticeships Incentives Program (Commonwealth of Australia 2020, p.77).

This measure builds on the COVID-19 Response Package — supporting apprentices and trainees announced in July 2020’s Economic and Fiscal Update.


Pensioner $250 Economic Support Payment 

Effective date: November 2020 (first payment) and March 2021 (second payment)

The Government will provide two Economic Support Payments of $250 each to eligible income support recipients and concession card holders.

The payments will be made progressively from December 2020 and March 2021 to eligible individuals.


Parental Leave Pay: Work text extension 

Effective date: 22 March 2020

The Government has temporarily relaxed the Paid Parental Leave work test for births and adoptions that occur between 22 March 2020 and 31 March 2021 to allow parents to qualify for the payment if they have worked in 10 of the last 20 months (previously 13 months) preceding the birth or adoption of a child. This means that work undertaken by the parent before the COVID-19 pandemic can be counted towards the work test.

Those individuals that had a claim rejected from 22 March 2020 may have their eligibility tested again under the revised rules.

Click here for Services Australia


Pension Loans Scheme 

Effective date (proposed): June 2021

The Government is proposing to deliver the following customer experience improvements to the Pension Loans Scheme:

  • loan calculator to help people test their eligibility and estimate loan balances
  • electronic loan repayments
  • online services to make changes to loan terms and print/requested statements
  • improved access to specialist staff
  • join online claim for partnered customers with more relevant questions
  • ability to complete regular loan reviews online.

Click here for Services Australia


Youth Allowance and ABSTUDY Independence test

Effective date: 1 January 2021

The Government proposes a temporary change to the independence test for those applying for Youth Allowance and ABSTUDY from 1 January 2021, allowing young people who are deemed independent from their parents to avoid the Parental Income Test.

Under the temporary measure, from 1 January 2021 all ABSTUDY and Youth Allowance applicants will be assumed to have worked over the 6-month period from 25 March 2020 to 24 September 2020 (Commonwealth of Australia 2020, p.152).


Granny Flats

In addition to the measure(s) below, the Government will also provide a CGT exemption for granny flat arrangements where a formal written agreement is put in place. Refer to the Taxation section of for further information.

Visit the ATO website here


Additional homecare and aged care packages

Effective date: 2020/21 for four years

The Government will release further funding for an additional 23,000 home care packages across all levels, improving the waiting time for older Australians accessing aged care.

Check the latest here


Aged care funding 

Effective date: 2020/21

Funding will be provided to enhance transparency and regulatory standards, including

  • continued residential aged care funding reform by undertaking ‘shadow assessments’ under the Australian National Aged Care Classification.
  • maintaining the capacity of the Aged Care Quality and Safety Commission in ongoing regulation and compliance of the aged care sector.
  • supporting the Department of Health and the Aged Care Quality and Safety Commission to respond to requests from the Royal Commission into Aged Care Quality and Safety.
  • providing additional dementia services and training programs.
  • administering the serious incident response scheme.
(Commonwealth of Australia 2020, p. 90-1, 211)
Want to grow your business? Get in touch