Introduction
This end of financial year brings with it a number of important legislative changes. This includes changes to superannuation, tax, consumer law, aged care, and medicare – all of which commence on 1 July 2021. Many of the reforms will be beneficial in enhancing superannuation, decreasing tax, and improving aged care quality. In this article, we’ll give an overview of the major changes and how they may impact you this July.
1. Superannuation
The government is making several changes to enhance the superannuation system in Australia. This includes increases in the superannuation guarantee, contributions cap, and changes to how super accounts run.
The superannuation guarantee will increase from 9.5% to 10%. This is the minimum amount the law requires employers to pay into their employee’s super funds. Employers must ensure that they update their payment systems so that they are paying the correct amount.
The contribution caps are also increasing, which is relevant to self-managed super funds (SMSF). Concessional contributions are payments made into an SMSF that the law considers to be a part of a SMFS’s assessable income. The cap on concessional contributions increases from $25,000 to $27,500. Non-concessional contributions are contributions made into a SMSF that are not considered as part of the SMSF assessable income. The cap on non-concessional contributions increases from $100,000 to $110,000.
Finally, the government is also making changes to how super accounts run. Employees will no longer have a new super account every time they start a new job. Instead, the same super account will follow employees through each new job. The government estimates this change will save approximately $2.8 billion over 10 years, by eliminating duplicate fees, insurance, and lost earnings.
For more information, you can read our guide on ‘How does superannuation work (employee)’
2. Tax
Last year the Treasury Laws Amendment (A Tax Plan for the Covid-19 Economic Recovery) Bill 2020 introduced an offset for low and middle-income tax for the 2020-21 financial year. This now extends to the 2021-22 financial year. The low and middle-income tax offset is available to all taxpayers with an income of up to $126,000.
Some businesses may also benefit from changes to tax, with the base rate entity company tax decreasing to 25%. Businesses will be eligible if they have both an annual turnover of less than $50 million, and 80% or less of their assessable income is base rate entity passive income. This decrease is down from 26% in 2020-21 and is much less than the 30% rate for all other businesses.
Base rate entity passive income is:
- corporate distributions and franking credits on the distributions
- royalties and rent
- interest income
- gains of qualifying securities
- a net capital gain
- an amount included in the assessable income of a partner in a partnership or a beneficiary of a trust, to the extent it is traceable to an amount that is otherwise base rate entity passive income.
For more information, you can read our guide on ‘How tax works for each business structure’.
3. Consumer Law
The definition of a consumer is expanding as goods or services with a value of up to $100,000 are caught by the consumer guarantees. This is an increase from $40,000 which was originally set in 1986. The increase, therefore, brings consumer law in line with the modern-day value of goods adjusted for inflation.
Suppliers will need to review their goods and services to ensure that they are complying with the consumer guarantees as per the Competition and Consumer Act 2010 (Cth).
For more information, you can read our guide on ‘What are consumer guarantees’
4. Aged Care
Following the Royal Commission, the government is making several changes to improve aged care. The Aged Care and Other Legislation Amendment Bill 2021 aims to reform the Aged Care Act 1997 (Cth) with changes set to take place on 1 July 2021.
The reforms target restrictive practices, which is as any practice that has the effect of restricting the rights or freedom of movement of the care recipient. It may involve the use of chemical or physical restraint. Under the new law, restrictive practices are a last resort, and providers of restrictive practices must meet certain requirements. The law also gives the aged care commissioner powers to issue civil penalties for breaches.
5. Medicare
The government is making several changes to the Medicare Benefits Schedule (MBS) which lists all the medicare services the government subsidies. This change will impact approximately 900 MBS items. The effect of the reform is to bring the MBS up to date with contemporary medical practice and make some procedures more cost-effective for patients.
The government estimates the changes will primarily impact orthopaedic, cardiac, and general surgery, though there is some uncertainty as to how significant this change will be. Increased rebates will, in particular, affect orthopaedic, plastic, reconstructive, general surgery, and gynaecology and patients will welcome the increased refunds.
The government is also adding new procedures to the MBS list including RTMS, a treatment for depression, and ambulatory blood pressure monitoring which helps to diagnose high blood pressure.
Conclusion
Many of the laws changing on 1 July 2021 will have a significant impact on businesses and individuals. Readers should note that many of the changes are likely to change again next financial year, as the government implements wider plans in relation to superannuation, tax, and aged care. If you have any questions around how these laws may affect you, we recommend that you get in touch with a lawyer.
