Australia

Low and Middle Income Tax Offset

The Low and Middle Income Tax Offset (LMITO) will be retained for the 2021-22 financial year, which provides further tax relief for low and middle income earners.

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Individuals earning between $48,000 and $90,000 will continue to receive the maximum $1,080 offset. For taxable income of $90,000 to $126,000, the offset phases out at a rate of 3 cents per dollar. Consistent with the 2020-21 income year, the LMITO will be received on assessment after individuals lodge their tax returns for the 2021-22 year.

Taxable income LMITO
Up to $37,000 $255
$37,001 to $48,000 $255 plus 7.5 cents for each dollar over $37,000
$48,001 to $90,000 $1,080
$90,001 to $126,000 $1,080 less 3 cents for each dollar over $90,000

Self-education expense deductions

Under current legislation, the first $250 of self-education expenses in connection with a prescribed course of education is not deductible.

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The Government will remove this $250 exclusion, allowing eligible individuals to claim additional self-education expense deductions.

This measure will have effect from the first income year after the date of Royal Assent of the legislation.

Modernising the individual tax residency rules

The individual tax residency rules will be modernised to a simple “bright-line” 183 day test.  

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Broadly, an individual will be an Australian tax resident where they are physically present in Australia for 183-days or more in any income year. Where the 183 day primary test is not met secondary tests that depend on a combination of physical presence and measurable objective criteria will apply.

This measure will have effect from the first income year after the date of Royal Assent of the legislation.

HomeBuilder extension

Originally announced in June 2020, the HomeBuilder program provides eligible owner-occupiers with a grant to build a new home or substantially renovate an existing home.

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The Government is extending the construction commencement requirement from six months to 18 months for all existing applicants. Applicants of the HomeBuilder program who signed contracts during the HomeBuilder eligibility period of 4 June 2020 to 31 March 2021 will have this additional 12 months to commence construction.

This decision responds to unanticipated delays in the construction industry caused by COVID-19 related supply constraints.

Taxing rights for New Zealand sports teams/support staff based in Australia due to COVID-19

New Zealand (NZ) will maintain its primary taxing right for individuals who are members of NZ based sporting teams which relocated to Australia to participate in league competitions due to COVID-19.

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The relocation of these teams would likely result in NZ athletes, coaches and support staff exceeding the 183-day test and Australia having the primary taxing right over the income.

The measure will apply to the 2020-21 and 2021-22 income and fringe benefits tax years.

Medicare levy low-income threshold

To reflect recent CPI movements, the Medicare levy low-income thresholds will increase for singles, families, seniors and pensioners, effective from 1 July 2020. This will ensure that low-income taxpayers generally continue to be exempt from paying the Medicare levy.

Medicare Levy Surcharge (MLS) and Private Health Insurance (PHI) rebate

The current policy settings for the income thresholds for the MLS and PHI rebate will be continued for a further two years from 1 July 2021.

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Singles without PHI will be required to pay MLS where their taxable income exceeds $90,000. For families without PHI, MLS will apply where income exceeds $180,000 with this threshold increased by $1,500 for each dependent child after the first. The PHI rebate rate varies depending on the level of income for a single person/family and the age of the oldest person covered by the policy.

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