Low and middle income tax offset extension
The Government has announced that the low middle income tax offset (LMITO) will be extended for the 2021-22 income year. The LMITO provides a reduction in tax of up to $1,080 depending on a taxpayer’s taxable income:

  • $37,000 or less – benefit by up to $255
  • $37,000 and $48,000 – the value of the offset increases at a rate of 7.5 cents per dollar to the maximum offset of $1,080
  • $48,000 and $90,000 – eligible for the maximum offset of $1,080
  • $90,000 to $126,000 – offset phases out at a rate of 3 cents per dollar.

Increase to Medicare levy low-income thresholds
The Medicare levy low-income thresholds for singles, families, seniors and pensioners will be increased from 1 July 2020.

The threshold will be increased for:

  • singles – from $22,801 to $23,226
  • families - from $38,474 to $39,167
  • single seniors and pensioners – from $36,056 to $36,705
  • family seniors and pensioners – from $50,191 to $51,094.

For each dependent child or student, the family income thresholds increase by a further $3,597 (previously, $3,533).

Removal of the non-deductibility of the first $250 of self-education expenses
The current non-deductibility of the first $250 of self-education expenses will be removed. The first $250 of a prescribed course of self education is currently not deductible. This measure is expected to apply from 1 July 2022.

Removal of cessation of employment taxing point for Employee Share Schemes
The Government announced that the cessation of employment taxing point for tax- deferred Employee Share Schemes (ESS) will be removed. Currently, under a tax-deferred ESS, where certain criteria are met employees may defer tax until a later tax year (the deferred taxing point). The deferred taxing point is the earliest of:

  • cessation of employment
  • in the case of shares, when there is no risk of forfeiture and no restrictions on disposal
  • in the case of options, when the employee exercises the option and there is no risk of forfeiting the resulting share and no restriction on disposal
  • the maximum period of deferral of 15 years.

This change will result in tax being deferred until the earliest of the remaining taxing points.

This change will apply to ESS interests issued from the first income year after the date of Royal Assent of the enabling legislation.

New individual tax residency tests
The Government announced it will replace the current individual tax residency principles. The proposed changes include a primary test — a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident, as is currently the case.

Individuals who do not meet the primary test will be subject to secondary tests that depend on a combination of:

  • the right to reside permanently in Australia (including citizenship and permanent residency)
  • Australian accommodation
  • Australian family
  • Australian economic connections.

The changes are expected to apply from 1 July 2022.