FEDERAL BUDGET 2021
THE biggest hip-pocket winners in the budget are set to be working parents with children aged five or under in care.
And millions of people will get a bonus of up to $1080 in their 2021-22 tax return.
There are no losers, but some households don’t get anything, including higher-earning singles, DINKS and families where there’s a stay-at-home mum or dad and a breadwinner bringing in more than $126,000.
Analysis done inside the Canberra budget lockup by PwC for News Corp Australia shows many working parents stand to save $6000 or more through increased childcare subsidies — in 2022-23.
The Morrison government has said it will try to get the measures in place before then, and before the next election.
The proposal is to raise the childcare subsidy for families with two or more children aged five and under to as much as 95 per cent, from a current maximum of 85 per cent. Up to 250,000 families will benefit; some will get an extra 30 per cent of their fees covered for their second child.
Mums and dads juggling young ones and jobs that bring in a combined $190,000 will do even better, because the government wants to scrap the subsidy cap that currently kicks in at that amount.
PwC chief economist Jeremy Thorpe said: “The support for young families with two children is a positive step to get more women into work and boost GDP.”
Treasurer Josh Frydenberg said the budget was “giving more parents, especially women, the choice to take on extra work”.
Treasury estimates that about 40,000 people will choose to work an additional day per week because of the childcare subsidy increases. These plans — which cost $1.7bn over five years and $670m annually after that — are contingent on the government getting legislation passed by parliament.
Labor is also promising to increase childcare subsidies. The Opposition has said, if elected, it would cover as much as
90 per cent of costs as part of a package that would have broader applicability than the government’s plans.
The other budget move that puts money back in pockets is the extension of the Low and Middle Income Tax Offset, or LMITO. It had been due to expire but instead has been maintained for 2021-22 only, at this stage.
It delivers $1080 to any worker or retiree earning between $48,000 and $90,000. A smaller amount of LMITO is payable above and below this range, just as it was last financial year, and for the current one.
A person earning $100,000 gets $780 back in their tax return; a worker on $40,000 will get $480. $480 $1080 $1080 $780 $30 $40,000 No change
$60,000 “
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$200,000 “
The Low and Middle-Income Tax Offset will be maintained. It was due to expire.
A person earning $40,000 will receive $480 back in their tax return. People on $48,000 to $90,000 will continue to get the full LMITO rebate of $1080. If you make over this amount but under $126,000 you too will get some offset but not as big. A person on $100,000 a year gets $780. If you’re earning $150,000 annually then you don’t get anything from the tax tweaks in the budget. The LMITO pays $255 to people earning up to $37,000. They also get the Low Income Tax Offset. The LMITO is only being extended by one year, so there is no saving in 2022-23. $510 $960 $2160 $2160 $2160 $1560
These households are big winners from the budget due to an increased childcare rebate — but not until July 2022.
After the next election, the subsidy for families with two or more young kids will rise to as much as 95 per cent, from a current maximum of 85 per cent. Those with total household income of $125,000 to $350,000 will be $6000 or more a year better off. Above $190,000 there’s an extra gain from $10,560 child care subsidy cap being scrapped.
If there is a saving for your family in 2021-22, it’s from the retention of a tax offset payable in tax returns. That’s just for 12 months. For now, anyway.
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The Low and Middle-Income Tax Offset is being continued into 2021-22. We don’t know what the Treasury intends after that. It can only be assumed that it won’t live on in 2022-23. Hence you could see a no-change result in that year.
Individuals earning between $48,000 and $90,000 will get the full amount of LMITO. If you’re earning more than $37,000 but under $48,000 you will get a lesser amount of LMITO. You also get the Low-Income Tax Offset, which isn’t in our figures as it was already legislated. If you’re on more than $90,000 but less than $126,000 you too will get some LMITO. $510 $960 $2160 $2160 $2160 $1560
The Low and Middle-Income Tax Offset, retained for 12 months, delivers a tax time kicker of $1080 for individuals on $48,000 to $90,000. So if the earnings in your household are a combined $150,000 split 50-50, then you’ll get $2160 between you.
LMITO payment starts at $255 for people on $37,000. Those on $37,000 to $48,000 get some LMITO too, but not the full rate of $1080 per person. If your household’s total income is $80,000 split evenly, you can expect to get $960 across your two tax returns. A worker bringing in up to $126,000 still gets some LMITO. The amount reduces as that upper limit is approached. $40,000 $209 $2163 $60,000 $735 $2163 $80,000 $1335 $2928 $100,000 $1335 $4370 $125,000 $1685 $6173 $150,000 $1860 $7095 $200,000 $1080 $7002 Families with little ones stand to be much better off — in 14 months — because of the childcare changes proposed in the budget.
The Morrison government says it will increase the fee rebate to as much as 95 per cent for a second (or subsequent) child under five. The biggest savings go to households where one parent is earning about $160,000 and the other is bringing in $80,000. Such a household stands to be $7000 a year better off.
Part of the benefit will be from scrapping the subsidy cap that currently kicks in at household income of $189,390. These changes are for 202223 and have to be legislated. $40,000 $209 No change $60,000 $735 “$80,000 $1335 “$100,000 $1335 “$125,000 $1685 “$150,000 $1860 “$200,000 $1080 “
If you are each on incomes between $48,000 and $90,000, you’ll get a combined $2160 back in your tax return courtesy of the retention of the Low and Middle-Income Tax Offset. LMITO was due to end. Its continuation is only guaranteed for 12 months, which is why our figures show no change in 2022-23. It wouldn’t be surprising if LMITO is extended yet again if the government holds another budget before the next election.
Some LMITO goes to individuals earning between $37,000 and $48,000, as well as between $90,000 and $126,000. But it’s less than the full rate.
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It’s important to note our tables are based on having one child, age nine. Many households like this will only benefit from the extension of the Low and Middle Income Tax Offset into 2021-22.
It returns as much as $1080. That goes to those on $48,000 to $90,000.
Lesser amounts are payable from $37,000 to $48,000 and from $90,000 to $126,000.
Our figures do not show the impact on a single parent who has two kids five or under in childcare.
A parent in this circumstance will get much more back – in 2022-23 – when fee rebates increase. $510 $960 $2160 $2160 $2160 $1560
The Low and Middle-Income Tax Offset is being extended into 2021-22. We don’t know what the government will do after that. The assumption has to be that it won’t live on in 2022-23, hence there being no change in that financial year.
Workers bringing in between $48,000 and $90,000 apiece will get the full amount of LMITO. If you’re making between $37,000 and $48,000 you will a lesser amount of LMITO. You also get the Low-Income Tax Offset, which isn’t in our numbers because it was already legislated.
If you’re on more than $90,000 but less than $126,000 you will get some LMITO, but not the full whack.
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The budget offers a serious financial incentive for the stay-at-home parent in these households to go into paid employment. After all, the Morrison government mantra is jobs and more jobs.
A comparison between this household type and the double-income couples with young kids shows the childcare bill could be cut by $6000 or more. If the breadwinner in this family earns between $37,000 and $126,000 they will get some Low and Middle Income Tax Offset, which has only been retained for one more year.
The full $1080 is paid to workers earning between $48,000 and $90,000.