Legislative update: Taxation & social security

As we approach the 2020 festive season and begin to turn our eyes to some well-earned R&R, it’s important to highlight that a number of key Bills recently passed through the parliamentary process and became Acts.

And, while many of these Bills relate to proposed measures announced on 6 October 2020 in the 2020-21 Federal Budget, there are also a few that precede this date. Below is an overview of these now legislated Bills.

Please note: We have also included three Bills that are still pending, which relate to social security and super:

• coronavirus support-related measures
• self-managed super fund allowable member numbers
• non-concessional contribution (the bring-forward rule) eligibility.

Regardless of whether you are a wealth accumulator or retiree, you may find that one or more of these legislative changes are relevant to your personal finances, both now and in the future.

Legislative update: Bills recently passed

Social Services portfolio: A Bill regarding additional economic support payments

Eligible payment recipients and card-holders will be entitled to receive two separate additional $250 economic support payments—these are non-taxable, and non-assessable for social security purposes.

To be eligible, an individual must be residing in Australia and receive or hold one of the following payments or cards on 27 November 2020 (for the first payment) and/or 26 February 2021 (for the second payment):

• Age Pension, Carer Payment, or Disability Support Pension
• Carer Allowance, Double Orphan Pension or Family Tax Benefit Part A and/or Part B (if not in receipt of a primary income support payment)
• Commonwealth Seniors Health Card
• Pensioner Concession Card (if not in receipt of a primary income support payment)
• Certain Veterans’ Affairs payment and concession cards

The first payment will be paid from 30 November 2020, and the second payment will be paid from 1 March 2021.

Social Services and Other Legislation Amendment (Coronavirus and Other Measures) Bill 2020. Royal assent on 13 November 2020.

Social Services portfolio: A Bill regarding the JobMaker Hiring Credit scheme

The Treasury has been authorised to make rules to facilitate the JobMaker Hiring Credit Scheme, which will operate from 7 October 2020 to 6 October 2022.

These rules encompass, for example, the establishment of the JobMaker Hiring Credit scheme, and setting out:

• which employers qualify for the payment
• the employees to which payments relate
• the amount payable and timing of payments
• the obligations for recipients of the payment.

Economic Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020. Royal assent on 13 November 2020.

Social Services portfolio: A Bill regarding the Paid Parental Leave work test period

The Paid Parental Leave work test period has been briefly extended from 13 months (392 days) before the birth or adoption of a child, to 20 months (600 days) for parents affected (employment-wise) by COVID-19*.

*They became unemployed, their working hours were reduced (including to zero), or their business for which they work was suspended or suffered reduced turnover—and, as a result of those effects, they would not satisfy the ordinary work test.

Please note: This change applies to births and adoptions that occur between 22 March 2020 and 31 March 2021. This change will also allow people—who meet the concessional work test—to backdate the start date of their Paid Parental Leave period to the later of the date of birth or adoption of their child or their nominated start day.

Lastly, it’s worth noting that changes to the Paid Parental Leave Act 2010, made by another Bill that was recently passed, the Coronavirus Economic Response Package Omnibus (Measures No. 2) Bill 2020, allows for time spent on the JobKeeper Payment to count towards the Paid Parental Leave work test.

Social Services and Other Legislation Amendment (Coronavirus and Other Measures) Bill 2020. Royal assent on 13 November 2020.

Coronavirus Economic Response Package Omnibus (Measures No. 2) Bill 2020. Royal assent on 9 April 2020.

Treasury portfolio: A Bill regarding accelerating the Personal Income Tax Plan

As previously covered in our article, ‘Taxation update: Personal Income Tax Plan‘, the following changes have occurred in relation to individual taxation and the Government’s Personal Income Tax Plan:

• Stage 2 of the Personal Income Tax Plan has been brought forward from 1 July 2022 to 1 July 2020 (backdated):
  • The upper threshold of the 19% personal income tax bracket has increased from $37,000 to $45,000.
  • The upper threshold of the 32.5% personal income tax bracket has increased from $90,000 to $120,000. The upper threshold of the 37% personal income tax bracket remains at $180,000.
  • The low-income tax offset (LITO) has increased from $445 to $700 (and decreases at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and decreases at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667).
• The low and middle-income tax offset (LMITO) will apply for the 2020-21 financial year only. For context, the LMITO was due to end as marginal tax rates decreased.

Please note: Stage 3 of the Personal Income Tax Plan remains unchanged and commences in the 2024-25 financial year, as previously legislated.

Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020. Royal assent on 14 October 2020.

Treasury portfolio: A Bill regarding various company taxation-related measures

Contained within the same Bill—relating to the aforementioned Personal Income Tax Plan—there were also several proposed legislative changes to company taxation. Below is a brief summary of these changes:

• Temporary loss carry back: A corporate tax entity with an aggregated turnover of less than $5 billion will be allowed to carry back a tax loss for the 2019-20, 2020-21 or 2021-22 financial year and apply it against tax paid in previous financial years 2018-19, 2019-20 and 2020-21. Please note: Eligible corporate tax entities may receive a tax refund when they lodge their 2020-21 or 2021-22 income tax returns.
• Increasing small business entity turnover threshold for certain concessions: Eligible entities with an aggregated turnover of $10 million or more and less than $50 million will be allowed to access several small business entity tax concessions in phases from 1 July 2020.
• Temporary full expensing of depreciating assets: Businesses with an aggregated turnover of less than $5 billion will be allowed to deduct the full cost of eligible depreciating assets that are first held, and first used or installed ready for use for a taxable purpose, between the 2020 budget time (7:30pm AEDT on 6 October 2020) and 30 June 2022. Businesses are also able to deduct the full cost of improvements to these assets and to existing eligible depreciating assets made during this period.

Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020. Royal assent on 14 October 2020.

Legislative update: Bills still pending

Social Services portfolio: A Bill regarding various coronavirus support-related measures

Contained within a Bill are several proposed legislative changes regarding various coronavirus support-related measures, which would see the following, for example:

• Coronavirus Supplement: Allowance for an extension of the temporary Coronavirus Supplement from 1 January 2021 to 31 March 2021—at a rate of $150 per fortnight—and, that the Coronavirus Supplement can be extended to all persons in receipt of Youth Allowance, including full-time students and new apprentices.
• Ordinary waiting period, newly arrived resident’s waiting period and seasonal work preclusion period: Removal of provisions relating to the Coronavirus Supplement and the COVID-19 exemptions from the ordinary waiting period, newly arrived resident’s waiting period and seasonal work preclusion period, from 1 April 2021.
• Liquid assets test waiting period and assets tests: Permanent removal of the temporary COVID-19 exemptions from the liquid assets test waiting period and assets tests, from 19 December 2020.
• Extending the period that a residence is the person’s principal home: Introduction of a discretionary power under the social security and veterans’ entitlements assets tests to extend the principal home temporary absence provisions where a person, for reasons beyond their control, can’t return to Australia within the allowable absence period.

Social Services and Other Legislation Amendment (Extension of Coronavirus Support) Bill 2020.

Treasury portfolio: A Bill regarding self-managed super fund membership limit

In the 2018-19 Federal Budget, a proposed legislative change was announced that would see an increase to the maximum number of allowable members for a self-managed super fund (SMSF).

In a nutshell, this legislative change would mean that an SMSF could have a maximum of six, rather than four, members. This change could help larger families to include additional family members in an SMSF—as opposed to, for example, creating two SMSFs (incurring additional costs), or placing their super in a larger fund.

Please note: In the Bill’s current form, this change would apply from the start of the first quarter that commences after the Act receives royal assent.

Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020.

Treasury portfolio: A Bill regarding the bring-forward non-concessional contributions cap

In the 2019-20 Federal Budget, a proposed legislative change was announced that would see an increase in the age at which an individual may make up to three years of non-concessional contributions under the bring-forward rule.

In a nutshell, this legislative change would mean that an individual under 67 years of age anytime during the financial year, rather than under 65 years of age, could access the bring-forward non-concessional contributions cap in a particular financial year.

Please note: In the Bill’s current form, this change would apply to non-concessional contributions made on or after 1 July 2020 (backdated).

Treasury Laws Amendment (More Flexible Superannuation) Bill 2020.

Other important points

• The shortcut method for work-related home office expenses pertaining to the 2020-21 financial year ceases on 31 December 2020.
• The COVID-19 early release of super ceases on 31 December 2020 (applications for the 2020-21 financial year release must be made prior to 11:59pm AEDT on this date).
• The HomeBuilder grant program has been extended from 31 December 2020 to 31 March 2021 (contracts to build a new home or substantially renovate an existing home must be signed on or before this date). Applications may be submitted up to 14 April 2021. Please note: For contracts signed between 1 January 2021 and 31 March 2021, the grant will be $15,000, down from $25,000. The construction commencement timeframe has also been extended from three to six months (backdated to 4 June 2020). And, in terms of the new home build price cap and contracts signed between 1 January 2021 and 31 March 2021:
  • for Victoria, the property value can’t exceed $850,000, up from $750,000,
  • for New South Wales, the property value can’t exceed $950,000, up from $750,000, and
  • for all other States and Territories, the property value can’t exceed $750,000, no change.

Finally, where a contract is signed on or after 29 November 2020 the builder or developer must have a valid licence or registration prior to 29 November 2020. Where the contract is signed before 29 November 2020 the builder or developer must have a valid licence or registration prior to 4 June 2020.

If you would like to discuss anything mentioned above, and its relevance to your financial situation, goals and objectives, please contact us.