Breakdown of the key tax changes and health care spending announced on Tuesday 1 May 2021 by the Federal Government are outlined below:
Low and Middle Income Tax Offset (LMITO)
For Graduate Medical Professionals this will be a welcomed tax saving as . As widely predicted, the Low and Middle Income Tax Offset (LMITO) will be extended for another year. The LMITO will provide a reduction in tax of $1,080 for individuals with taxable income up to $126,000. This will now be retained for the 2021-22 year.
Medicare Levy Low Income Threshold
Another one for Graduate Medical Professionals with an increase to the low income threshold in line with recent movements in CPI. Where an individual’s taxable income is below this threshold then the individual ought to be exempt from paying the 2% Medicare Levy.
The deductibility rules are complex for individuals wishing to claim a tax deduction for Self-Education Expenses. To simply this process the ATO has removed the $250 reduction rule which ought to make the process to identify what amounts are tax deductible easier. This rule only applied to university studies and not courses provided by the Professional Bodies such as the Royal College of Surgeons and Royal College of Physicians.
Instant Asset Write Off
Medical Practices where possible should be taking advantage of this extension to the asset write off to 30 June 2023. Practices (turnover below $5 billion) can claim 100% tax deduction of the cost of purchasing new assets and costs to improve existing assets regardless of the cost of the asset (Note – the car limit will continue to apply for luxury cars which for the 2020/21 FY is $59,136).
Second hand assets will also apply to this measure however only for those businesses with an aggregated turnover of less than $50 million although practices will most often buy new.
For those Practice that depreciate their assets in a Pool they can write off the entire Pool balance at the end of the financial year.
The ATO has announced it will remove the Superannuation Guarantee threshold for an employee earning less than $450 a month so all employees are paid Superannuation Guarantee by their employer regardless of how much they earn. The change is expected to apply from 1 July 2022.
Where you pay wages to low income relatives then from 1 July 2022 you will be required to pay superannuation regardless of the monthly salary.
ATO Debt Recovery
Practices (turnover less than $10 million p.a.) are able to apply to the Small Business Taxation Division of the AAT to pause of modify ATO debt recovery action until their underlying case is decided.
Currently, small business can only pause ATO debt recovery action in the courts. This new avenue will enable a small business to pause ATO debt recovery until their case has been heard by the AAT.
Income Tax Exemptions (NPO’s)
Currently Non-Profit Organisations can self-assess their eligibility for Income Tax Exemptions without an obligation to report to the ATO.
From 1 July 2023, the ATO will require NPO’s with an active ABN to submit online annual self-review forms to ensure only eligible NPO’s are receiving the exemption.
The Government has committed an additional $500 million to extend the JobTrainer Fund by a further 163,000 places and extend the program until 31 December 2022. JobTrainer is matched by state and territory governments and provides job seekers, school leavers and young people access to free or low-fee training places in areas of skills shortages. If you have a need for staff in your practice you should consider this initiative.
Abolition of the work test for contributions from 1 July 2022
Superannuation work test currently applies to anyone wanting to make personal contributions between the ages of 67 and 74 years old (inclusive). This requires a person to work at least 40 hours in 30 consecutive days in a financial year before they can make personal contributions to super. The work test also applies salary sacrifice arrangements.
From 1 July 2022, the government proposes to abolish the work test for non-concessional contributions (including ‘bring forward’ contributions) and salary sacrifice contributions for anyone aged between 67 and 74 years old. It also applies to contributions made for a person’s spouse.
Health Care Spending
The Government has pledged $17.7 billion over 5 years as part of an overall funding package in response to the Royal Commission into Aged Care Quality and Safety. This spending includes:
- Residential Aged Care Services – the Government will provide $7.8 billion over five years from 2020-21 into improving the service and sustainability of residential aged care services, including:
- $9 billion over four years from 2021 on increasing front line care minutes with 200 minutes per day (40 minutes with a registered nurse) to be mandated by October 2023.
- $3.2 billion to support aged care providers via a new daily supplement of $10 per resident.
- $278.8 million over three years to continue the temporary financial support for aged care providers.
- $189.3 million over four years to implement a new funding model, the Australian National Aged Care Classification.
- $117.3 million to support structural reforms of the aged care sector and the strengthened financial reporting requirements for residential aged care providers.
Home Care Packages
The government announced an additional $7.5 billion will be provided in creating new home care packages which includes:
- $5 billion over four years to create 80,000 new home care packages over two years from 2021-22.
- $798.3 million for greater access to respite care and support carers.
- $272.5 million over four years to support access to information about aged care for senior Australians.
- Aged Care Quality & Safety – $942 million over four years of new funding will be directed to improve the quality and safety of aged care services, including:
- $7 million for primary and other health care access and additional digital & face-to-face support to navigate the aged care system.
- $301.3 million for the Aged Care Quality and Safety Commission to ensure the safety and integrity of aged care services and to address the failures of COVID-19 response.
- $200.1 million for a new star rating system for senior Australians and their family and carers to make comparisons of aged care providers.
Regional Access to Aged Cared & Governance
Total of $698.3 million in funding over five years, with the largest share to improve access to quality aged care services in regional, rural and remote areas, including those with Indigenous backgrounds and special needs groups.
The Government will spend $1.9 billion over the five years commencing 2020-21 to continue the rollout of COVID-19 vaccines.
The Government will spend $879 million over the two years from 2020-21 (including around $140 million carried over from last year’s budget) to support Medicare and access to medicines in response to the COVID-19 pandemic. These measures include:
- $1 million to extend temporary Medicare Benefits Schedule (MBS) pathology items for COVID-19 testing.
- $204.6 million to extend temporary telehealth MBS services until the end of 2021, with some revised billing arrangements to commence 1 July 2021.
The Government will also spend $845.3 million over the two years from 2020-21 to continue its emergency response to the pandemic.
The Government will spend $2.3 billion over the four years starting 2021-22 to implement the National Mental Health and Suicide Prevention Plan, in collaboration with state and territory governments. This spending includes around $1.2 billion for mental health treatment (including specialised youth and disability services), almost $300 million for suicide prevention, around $250 million for prevention and early intervention and around $200 million to support workforce and governance.
The Morrison Government is also directly investing $123 million in the rural health workforce and training to improve access to health in areas outside our big cities and to increase the opportunities for a rewarding career in rural, regional and remote communities.
Key investments in rural and regional health are:
- $65.8 million to increase the Rural Bulk Billing Incentive for doctors working in rural towns and remote areas
- $12.4 million to expand opportunities for early-career doctors to work in rural communities while they complete their medical training through the new John Flynn Prevocational Doctor Program
- $0.3 million to develop a new model and streamline the Rural Procedural Grants Program and the Practice Incentives Program procedural GP payments into a new rural generalist GP support program for GPs with advanced skills