2021/22 Budget Update

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Individuals

Low and Middle Income Tax Offset extended to 2022

LMITO will be retained for one more income year, so that it will still be available for 2022. Under current legislation, the LMITO was due to be removed from 1 July 2021.

The LMITO will apply as follows for the 2022.

  • $37,000 or less Up to $255
  • $37,001 to $48,000 $255 + 7.5% of excess over $37,000
  • $48,001 to $90,000 $1,080
  • $90,001 to $126,000 $1,080 – 3% of excess over $90,000
  • $126,001 + Nil


Consistent with current arrangements, the LMITO will be applied to reduce the tax payable by
individuals when they lodge their tax returns for the 2022 income year.


Increased Medicare levy low-income thresholds

The Medicare levy low-income thresholds will be increased for singles, families and seniors and pensioners for the 2021 income year, as follows:

  • Singles will be increased from $22,801 to $23,226.
  • Families will be increased from $38,474 to $39,167.
  • Single seniors and pensioners will be increased from $36,056 to $36,705.
  • Seniors and pensioners will be increased from $50,191 to $51,094.


For each dependent child or student, the family income thresholds increase by a further $3,597, up from the previous amount of $3,533.


Update to individual tax residency rules

The individual tax residency rules will be replaced with a new, modernised framework.
The primary test will be a simple ‘bright line’ test – a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident.

Individuals who do not meet the primary test will be subject to secondary tests that depend on a
combination of physical presence and measurable, objective criteria. The new framework will be easier to understand and apply in practice, deliver greater certainty, and lower compliance costs for globally mobile individuals and their employers. This measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.


Update to self-education expense deductions

The exclusion of the first $250 of deductions for prescribed courses of education will be removed.
This measure will have effect from the first income year after the date of Royal Assent of the
enabling legislation.


Employee Share Schemes – ‘cessation of employment’ to be removed as a taxing point

The ‘cessation of employment’ will be removed as a taxing point for tax-deferred Employee
Share Schemes (‘ESS’) that are available for all companies. This change will apply to ESS interests issued from the first income year after the date of Royal Assent of the enabling legislation.

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 remove the ‘cessation of employment’ taxing point and result in tax being deferred until the earliest of the remaining taxing points.


Businesses

Temporary full expensing extension

In the 2020/21 Budget, the Government announced amendments to allow businesses with an aggregated turnover of less than $5 billion to access a new temporary full expensing of eligible depreciating assets until 30 June 2022. In the 2021/22 Federal Budget, the Government has announced that temporary full expensing will be extended by 12 months to allow eligible businesses with aggregated annual turnover of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023. All other elements of temporary full expensing will remain unchanged, including the alternative eligibility test based on total income, which will continue to be available to businesses.


Temporary loss carry-back extension

In the 2020/21 Budget, the Government announced amendments to introduce a temporary loss carry-back measure. Broadly, this initial measure allowed ‘corporate tax entities’ with an aggregated turnover of less than $5 billion to carry back tax losses made in the 2020, 2021 and 2022 income years to claim a refund of tax paid (by way of a tax offset) in relation to the 2019, 2020 and 2021 income years. In the 2021/22 Budget, the Government has announced that the loss carry-back measure will be extended to allow eligible companies with aggregated turnover of less than $5 billion to carry back tax losses from 2023 to offset previously taxed profits as far back as 2019 when they lodge their tax return for the 2023 income year.

The tax refund available under this measure is limited by requiring that the amount carried back is not more than the earlier taxed profits and does not generate a franking account deficit. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.


Digital economy

The Digital Economy Strategy includes the following:

  • Taxpayers to self-assess the tax effective lives of eligible intangible depreciating assets, such as patents, registered designs, copyrights and in-house software. This measure will apply to assets acquired from 1 July 2023, after the temporary full expensing regime has concluded. The tax effective lives of such assets are currently set by statute.
  • Digital Games Tax Offset to provide a 30% refundable tax offset for qualifying Australian digital games expenditure ongoing from 1 July 2022, with the criteria and definition of qualifying expenditure to be determined through industry consultation.
  • Develop and transition government services to a new, enhanced myGov platform, providing a central place for Australians to find information and services online


Debt recovery for small business

Small business entities with an aggregated turnover of less than $10 million per year to apply to
the Small Business Taxation Division of the Administrative Appeals Tribunal (the ‘Tribunal’) to
pause or modify ATO debt recovery actions, such as garnishee notices and the recovery of general interest charge or related penalties, where the debt is being disputed in the Tribunal.


Tax treatment of qualifying storm and flood grants

Category D grants provided under the Disaster Recovery Funding Arrangements 2018, where those grants relate to the storms and floods in Australia that occurred due to rainfall events between 19 February 2021 and 31 March 2021 to be income tax exempt. These include small business recovery grants of up to $50,000 and primary producer recovery grants of up to $75,000. The grants will be made non-assessable non-exempt income for tax purposes. This is subject to eligibility criteria.


Superannuation


Removing the work test for voluntary contributions

Individuals aged 67 to 74 years (inclusive) to make or receive non-concessional contributions (including under the bring-forward rule) and salary sacrifice contributions without meeting the work test, subject to existing contribution caps. Individuals aged 67 to 74 years (inclusive) will still have to meet the work test to make personal deductible contributions.

The measure will have effect from the start of the first income year after Royal Assent of the
enabling legislation, which the Government expects to have occurred prior to 1 July 2022.
Currently, individuals aged 67 to 74 years (inclusive) can only make voluntary contributions (both
concessional and non-concessional) to their superannuation fund, or receive contributions from
their spouse, if they satisfy the work test (subject to a limited work test exemption). Generally, to
satisfy the work test, an individual must be working for at least 40 hours over a period 30 consecutive days in the income year the relevant contribution is made.


Reducing the age limit for downsizer contributions

The downsizer contributions age will be reduced from 65 to 60.The measure will have effect from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects to have occurred prior to 1 July 2022.The downsizer contribution allows eligible individuals to make a one-off, after-tax contribution to their superannuation fund, of up to $300,000 per person, following the disposal of an eligible dwelling, where certain conditions are satisfied. Under the current requirements, an individual must be at least 65 years of age at the time of making the relevant contribution, for the contribution to qualify as a downsizer contribution.


Removing the $450 per month threshold for Superannuation Guarantee

The current $450 per month minimum income threshold, will be removed. i.e superannuation guarantee applies from the first $1 of wages paid to employees. The measure will have effect from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects to have occurred prior to 1 July 2022.


Relaxing the residency requirements SMSFs

The Government will relax residency requirements for SMSFs and small APRA-regulated funds by:

  • extending the central control and management test safe harbour from two years to five years for SMSFs
  • removing the active member test for both types of funds.

The measure will have effect from the start of the first income year after Royal Assent of the
enabling legislation, which the Government expects to have occurred prior to 1 July 2022.


Exiting legacy retirement products

The Government has announced that it will allow individuals the temporary option to exit and
convert from a specified range of legacy retirement products (together with any associated
reserves) into more flexible and contemporary retirement products, for a two-year period.
The products covered by this measure include market-linked, life-expectancy and lifetime products that were first commenced before 20 September 2007 from any provider (including an SMSF), but not flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme. The measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.

Currently, these products can only be converted into another like product and limits apply to the
allocation of any associated reserves without counting towards an individual’s contribution caps.
This measure will permit full access to all of the product’s underlying capital, including any reserves, as part of transitioning into a more flexible and contemporary retirement product.

Social security and taxation treatment will not be grandfathered for any new products commenced with commuted funds, and the commuted reserves will be taxed as an assessable contribution.


Changes to the First Home Super Saver scheme

The Government has announced that it will make the following changes to the FHSS scheme.

  • The maximum releasable amount of voluntary concessional and non concessional
    contributions under the FHSS scheme to be increased from $30,000 to $50,000. This change will apply from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects will have occurred by 1 July 2022.
  • Four technical changes to the legislation underpinning the FHSS. These four changes will apply retrospectively from 1 July 2018.
  • Increasing the discretion of the Commissioner of Taxation to amend and revoke FHSS scheme applications.
  • Allowing individuals to withdraw or amend their applications before receiving a FHSS scheme amount and allow those who withdraw to re-apply for FHSS scheme releases in the future.
  • Allowing the Commissioner of Taxation to return any released FHSS scheme money to superannuation funds, provided that the money has not yet been released to the individual.
  • Clarifying that the money returned by the Commissioner of Taxation to superannuation funds is treated as a fund’s non-assessable non-exempt income and does not count towards the individual’s contribution caps.

The information provided in this update is general in nature and if you have any queries or require further information or assistance with the above, please contact our office.

Crawford News

February 2026 - Update

February 3, 2026
Cash acceptance is mandated for essential purchases From 1 January 2026, food and grocery retailers must accept cash for in-person transactions of $500 or less between 7am and 9pm. Small businesses with aggregate annual turnover under $10 million are generally exempted from the mandate. However, this mandate still applies to small businesses that share a trademark with a large retailer. The Government noted that, in addition to the cash mandate for fuel and groceries, consumers also already have the option to pay their bills, including utilities, phone bills and council rates, in cash at their local Australia Post outlet through Post Billpay. The Government will review this mandate after three years, to ensure it is functioning as intended. ATO child support data-matching program ATO will acquire child support data from Services Australia for the 2025 to 2027 income years, including the following: The ATO estimates that records relating to up to 300,000 individuals will be obtained each financial year, which will be matched against ATO records. The objectives of this program are to: allow Services Australia to more accurately assess child support obligations, and maximise opportunities to collect child support debts; and identify and educate individuals who may be failing to meet their lodgment obligations and help them to finalise their lodgment obligations, or notify the ATO that an income tax return is not required. Paying super guarantee Employers need to pay a minimum of 12% of each employee's ordinary time earnings into a complying super fund on a quarterly basis (the due date for the March 2026 quarter is 28 April 2026). In most cases, employees can choose the super fund. Employers who do not pay in full, on time or to the correct super fund will have to pay the SG charge, which is made up of the super they owe, nominal interest on those amounts (currently 10%), and an administration fee of $20 per employee, per quarter. These payments must be made through SuperStream. Small Business Superannuation Clearing House service will be permanently closed from 1 July 2026. Existing users should switch to an alternative method to pay their employees' super guarantee. When new employees start, employers must comply with the 'choice of fund rules' if the new employee does not choose a super fund. Employers may now need to request the new employee's 'stapled super fund' details from the ATO. Time limits on GST and fuel tax credit claims GST credits and fuel tax credits will expire if not claimed within the 4-year credit time limit (generally four years from the due date of the original BAS in which the taxpayer could have claimed them). Once credits expire, the ATO has no discretion or ability to amend the assessment to include those credits. There may be situations where the ATO is able to amend for overpaid or underpaid GST or overclaimed credits, but additional credits cannot be included in an amendment assessment. If credits are near expiry, taxpayers should consider: claiming the credits in their next BAS that is still within the 4-year credit time limit; requesting the amendment by lodging a revised BAS for the tax period to which the credits are attributable; or lodging a valid objection against their assessment for the period to which the GST credits are attributable before the end of the 4-year credit time limit. Departure Prohibition Orders for overdue tax debts The ATO is actively using departure prohibition orders as part of a broader shift towards debt collection. A DPO is an enforcement action available to the ATO to prevent certain persons with tax liabilities from leaving Australia without paying their outstanding tax. Since July 2025, the ATO has issued 21 DPOs, more than the total number issued in the entire financial year ended 30 June 2025. The ATO notes that a taxpayer was recently prevented from boarding a flight in the early hours of the morning due to a DPO imposed because of deliberate non-payment of a significant debt. The dog breeding activities treated as an enterprise The ART recently held that a taxpayer had carried on an enterprise of dog breeding for GST purposes. He had lodged activity statements for the quarters ended 30 September 2018 to 31 December 2021 inclusive, claiming input tax credits for the dog breeding activities he carried on from his home. The ATO disallowed the taxpayer's claims for the above periods, arguing that enterprises were not carried on, and that there was a lack of appropriate substantiation. The ART however held that the taxpayer's dog breeding operation was an enterprise for GST purposes, noting that his activities had "the necessary commercial character." Therefore, the taxpayer was entitled to ITCs for that enterprise. However, the ART affirmed the ATO's decision to reduce the taxpayer's other ITC claims, such as in relation to stamp duty on the acquisition of a property and for café and grocery expenses. The ART also admonished the taxpayer for apparently using artificial intelligence in the presentation of his case, as he appeared to rely on cases and principles that did not exist. The information provided in this Newsletter is general in nature and if you have any queries or require further information or assistance with the above, please contact our office.

December 2025 - Update

December 15, 2025
December 2025 Superannuation Guarantee is due on 28 January 2026 Employee super contributions for the quarter ending 31 December 2025 must be received by the relevant super funds by 28 January 2026. If the correct amount of SG is not paid by an employer on time, the employer must lodge a superannuation guarantee statement and pay the superannuation guarantee charge which includes admin fees and interest. ATO Small Business Superannuation Clearing House is closing ATO Small Business Superannuation Clearing House will close on 1 July 2026. Employers must make arrangements to move to an alternative clearing house now to avoid any unexpected delays with superannuation payments. Following are few key dates in relation to the clearing house. 10 December 2025 — Super payments, along with instructions, must be received by 5.30 pm AEDT on this date. Payments received after this time will be processed from 2 January 2026. 28 January 2026 — December SG due February to March 2026 — Employers should move to an alternative clearing house 28 April 2026 — March SG due 30 June 2026 — Final day of the service. Make final payments. Employers may already have other options readily available so they can exit from using the SBSCH ahead of time and your existing software and payroll packages may already include super functions they can use to pay SG. Popular software packagaes such as Xero contain their own clearing house.  ATO's approach to holiday home expenses ATO now takes the view that, if a taxpayer's rental property is also being used as a private holiday home, certain deductions relating to holding it will not be deductible in total as opposed to being apportioned. Expenses relating to ownership and use of the holiday home such as interest, rates and maintenance will not be deductible, unless the holiday home is 'mainly' used to produce assessable income. Whether a holiday home is used 'mainly' to produce assessable income will be determined based on a consideration of a number of factors. However, this will generally not apply to expenses incurred in relation to holiday homes that are rental properties before 1 July 2026, if those expenses are incurred under an arrangement entered into prior to 12 November 2025. ATO warns about barter credit tax scheme The ATO is warning the community to steer clear of an emerging tax scheme involving barter credits — a type of alternative currency used in some business networks. A tax scheme that involves artificially inflating deductions for donations of barter credits to deductible gift recipients is on the rise. While it may seem enticing, promoters and taxpayers could face potentially significant consequences if they are involved. The ATO is concerned that such schemes are being enabled by several barter exchanges that are allowing participants to access barter credits with a nominal face value that is much more than any payments actually made to the exchange. Participants then donate these barter credits to a DGR and claim a larger tax deduction than they are entitled to. Dental expenses are not deductible ATO has noted a number of claims for dental expenses this tax time. Dental expenses, including preventative and necessary dental treatment, medical expenses and other costs relating to personal appearance are not deductible. These expenses are generally private expenses, even if an employer expects an employee to maintain a certain appearance, or pays them an allowance to cover grooming expenses. A deduction can only be claimed for an expense that directly relates to earning their income. Private expenses cannot be claimed as a deduction. Taxpayers should have written evidence of all their expenses, and be able to show a direct connection with those expenses to their employment income. The information provided in this Newsletter is general in nature and if you have any queries or require further information or assistance with the above, please contact our office.

November 2025 - Update

November 6, 2025
ATO Focus on Small Business The ATO is actively identifying and addressing errors among businesses with turnovers between $1 million and $10 million. Key industries under scrutiny include property and construction, as well as professional, scientific, and technical services such as engineering, IT, design, and consulting. Common issues observed include: Omitted income or sales in Business Activity Statements and tax returns, including income from related entities. Overstated expenses or GST credits. Private expenses incorrectly reported as business-related or not properly apportioned. Failure to register for GST when required. Incorrect R&D tax incentive claims for ineligible activities. Lack of independent advice from registered tax agents, particularly in contractor arrangements. By highlighting these issues, the ATO aims to help small business operators improve compliance and avoid common mistakes. Dual Cab Utes and FBT Dual cab utes are not automatically exempt from fringe benefits tax. If an employer provides a dual cab ute for work purposes and it is available for personal use, it may be subject to FBT. To qualify for an exemption, the vehicle must: Be an eligible vehicle , meaning it is designed to carry at least one tonne, more than eight passengers, or it is not primarily designed for passenger use. Be used only for limited private purposes , such as minor, infrequent, or irregular trips. If these conditions are not met, the employer may be liable for FBT. Employers should monitor employee vehicle use and maintain proper documentation to determine eligibility. Claiming Business Expenses Taxpayers can claim deductions for most business expenses if they comply with the ATO’s three key rules which are: The expense must relate directly to business use. If the expense has both business and private use, only the business portion can be claimed. Taxpayers must keep records to substantiate their claims. New ATO Data-Matching Programs The ATO continues to enhance its data-matching programs to improve compliance, detect errors, and prevent fraud. Data is used to pre-fill returns, verify accuracy, and identify taxpayers who may need assistance. When discrepancies arise, the ATO may contact tax agents or their clients to clarify the differences. Rental Properties ATO will issue letters to taxpayers where its data suggests that rent income was omitted or incorrect in previously lodged returns. If you receive such a letter, please contact our office for assistance. Offshore Merchant Data-Matching The ATO will collect merchant transaction data from Australia’s major banks for the 2025–2027 financial years. Around 9,000 offshore merchant records will be acquired annually. SMSF Compliance and Release Authorities The ATO has noted an increase in self-managed super funds failing to comply with release authorities such as excess contributions or Division 293 tax. Common issues include: Failure to respond within the required 10 business days. Incorrect responses, such as not releasing the full amount or not submitting a release authority statement. Non-compliance can attract significant penalties. Trustees should ensure robust systems are in place to respond promptly and correctly to ATO release authorities. The information in this publication is general in nature and should not be relied upon as professional advice. Individuals should seek specific guidance to ensure applicability to their personal circumstances.

October 2025 - Update

October 7, 2025
Reminder of September Quarter Superannuation Guarantee Employee super contributions for the quarter ending 30 September 2025 must be received by the relevant super funds by Tuesday, 28 October 2025. If the correct amount of SG is not paid by an employer on time, they will be liable to pay the SG charge, which includes a penalty and interest component. Dealing with rental property repairs Taxpayers who have had work done on their rental property should ensure the expense is categorised correctly to avoid errors when completing their tax return. A deduction for repairs and maintenance expenses can be claimed for work done to remedy, or prevent defects, damage or deterioration from using the property to earn income. These expenses can be claimed in the year they were incurred. However, some capital expenditure may not be immediately deductible, such as for initial repairs, capital works, improvements and depreciating assets. Initial repairs include fixing any pre-existing damage or deterioration that existed at the time of purchasing the property, even if the damage or deterioration was unknown to the taxpayer at the time of purchase. Initial repairs are treated as part of the acquisition cost and included in the cost base of the property for CGT purposes, unless they are capital works or depreciating assets. Capital works are structural improvements, alterations and extensions to the property, and can generally be claimed at 2.5% over 40 years. Capital works deductions can only be claimed after the work has been completed, regardless of when the taxpayer pays the deposit and instalments. Improvements or renovations that are structural are also capital works. Work that goes beyond remedying defects, damage or deterioration that improves the function of the property is regarded as an improvement. Repairs to an entirety are capital and cannot be claimed as repairs. Repairs to an entirety generally involve the replacement or reconstruction of something separately identifiable as a capital item. ATO warns private use of work vehicles and FBT Employers who provide vehicles to their employees need to check how the vehicles are used and whether any exemptions apply to determine if they attract fringe benefits tax. FBT generally applies when a work vehicle is made available for private use, even if it is not actually used. Private use includes any travel not directly related to the employee's job. Exemptions may apply depending on the vehicle's specifications and the nature of the private use. The most common issues the ATO sees include: incorrectly treating private use as business use; assuming dual cab utes are exempt from FBT — exemptions only apply if the vehicle is eligible for the specific FBT exemption and private use is limited; incorrectly classifying vehicles; poor record keeping that does not support the claims or the FBT calculations made Tips to help sole trader clients The ATO is seeing sole traders make mistakes in the following areas: not reporting all income — this includes income earned outside their business (like a 'side hustle'), cash jobs, or payments in-kind/barter deals; overclaiming expenses — this includes claiming the portion of an expense related to personal use, or overstating the cost of goods sold and other business expenses; calculating business losses; incorrectly claiming and offsetting losses from non-commercial business activities against other income sources; misreporting personal services income ('PSI') to gain tax benefits; not registering for GST if they are in the taxi or ride-sourcing industry, or when they reach the GST threshold; and not keeping accurate and complete records. The information provided in this Newsletter is general in nature and if you have any queries or require further information or assistance with the above, please contact our office.

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