Individuals Stewardship Group key messages 25 May 2021

Budget update

Treasury and the ATO provided an overview of the Budget 2021–22 measures impacting individuals.

Modernising the individual tax residency rules

Proposed changes are expected to be in line with the Reforming Individual Tax Residency Rules – A Model for Modernisation report released by the Board of Taxation in 2019. It will include a bright-line 183-day test and integrity rules.

Timelines for consultation to the proposed changes will be confirmed for members to be involved.

The Board of Taxation: alternate residency flowchart from the report will be circulated to all members to support their high-level understanding of the intent of the measure.

The low and middle income tax offset

This offset has been retained for the 2021–22 income year. Treasury Laws Amendment (2021 Measures No 4) Bill 2021External Link contains the relevant low and middle income tax offset (LMITO) extension and received Royal Assent on 30 June 2021. LMITO is not included in pay as you go instalments calculations or withholding schedules.

Self-education expenses

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

Increase to Medicare levy low-income thresholds

There will be an increase to the Medicare levy low-income threshold to reflect recent movements in the Consumer Price Index, so that low-income taxpayers will continue to be exempt from paying the Medicare levy.

Employee share schemes

The government will remove the cessation of employment taxing point from employee share schemes (ESS). 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.

Superannuation guarantee eligibility

The government will remove the $450 per month threshold for superannuation guarantee eligibility to expand coverage to all employees regardless of their monthly pay.

Members raised the issue of the increased administrative burden to employers and questioned if this was considered. Treasury confirmed that administrative impacts would have been factored in.

Flexible super

Changes have been made to reduce the eligibility age for downsizer contributions from 65 years to 60 years and an increase has been made to the maximum amount for the first home super saver scheme from $30,000 to $50,000.

Tax time

The ATO has communications planned to support the community in preparation for this upcoming tax time. The communications strategy will be rolled out on multiple platforms including radio, print, television and social media.

The ATO’s objective is to provide help and support to taxpayers with the changes that are impacting clients this tax time, in order to make it easier for taxpayers to comply with their tax and super obligations.

Deceased estates taxation impacts

The ATO provided an update on their progress in actioning the 10 recommendations outlined in the Inspector General of Taxation and Ombudsman’s review: Death and Taxes: An investigation into ATO systems and process for dealing with deceased estates (PDF 4.60MB)This link will download a file which was published in July 2020. The 10 recommendations are aimed at improving the overall client experience when dealing with deceased estate issues.

Some of the main pieces of work relating to this include:

• working towards digital death notifications
• improving escalation processes and staff training within the ATO
• accessing information post-death (for probate and no probate estates)
• reviewing and improving public advice and guidance.

Vulnerable clients

A short update was provided on the ATO’s work that is exploring how the ATO manages interactions with vulnerable clients and identifying opportunities for improvement. Further updates will be provided at future meetings.

Attendees

Guest attendees