What’s new

13 May 2021

Budget 2021 - Individuals

Budget Changes for Individuals

Extension of the Low & Middle Income Tax Offset

The Low and Middle Income tax offset (LMITO) was introduced in the 2018 budget to start from 2019 to provide tax relief for low and middle income earners. The government has proposed an extension of the offset into the 2022 financial year.

You have been receiving this offset as part of your tax calculation for the past 2 years. It is not a new tax cut or offset 

The LMITO is a non-refundable offset, which means it can only reduce the amount of tax payable, it is not a flat amount refunded to tax payers. The offset is not reflected in your take home pay each pay period, but it will be applied on your annual tax returns for 2021 and now, 2022. 

Below are the LMITO available up to 2022:

Income brackets

LMITO Amount


$0 - $37,000

Up to $255

$37,001 - $48,000

$255 + 7.5% of excess over $37,000

$48,001 - $90,000


$90,001 - $125,333

$1,080 less 3% of excess over $90,000

$125,334 +


The benefit of the Low and Middle Income Tax Offset is in addition to the existing Low Income Tax Offset (LITO). So, some tax payers may be eligible for both the LITO and LMITO. 


Self Education Expenses

Currently the first $250 of a prescribed course of education expense is not tax deductible. In the budget handed down this week, the government has proposed a removal of this exclusion. 

This will mean a tax payer may be able to claim the first $250 of eligible education expenses, from the first $1. Please note, the education expense must be related to your current work, or build on your current skills, to be deductible.

This change would take effect from the first financial year after the proposal is legislated.


Simplified Rules for Tax Residency

The government has announced it will introduce simplified tax rules for determining tax residency.

The new rules will be based on:

  • the primary test ('bright-line') - if a person is physically present in Australia for 183 days or more in a financial year
  • the secondary test will apply if an individual does not satisfy the primary test and will look at a combination of physical presence and measurable objective criteria 

The change will take effect from the first financial year after the proposal is legislated.


Downsizer Superannuation Contributions 

The age limit from which downsizer contributions can be made by eligible individuals will be reduced from 65 to 60 years of age.

Downsizer contributions allow eligible individuals to make a one-off, after-tax contribution to their super fund, of up to $300,000 per person, following the disposal of an eligible home or dwelling.

The measure will have effect from the first financial year after the proposal is legislated.


Single Parent Family Home Guarantee

The Single Parent Family Home Guarantee will support eligible single parents with dependent children by allowing them to purchase a home with only a 2% deposit, provided they are able to service the loan repayments. The government will guarantee 18% of the purchase price.

10,000 places will be made available to access the guarantee over four years from 1 July 2021. 

The scheme will adopt the same definition of a dependent child that is contained in the Social Security Act. This means a dependent child is:

  • under 16 where the adult is legally responsible for the child's day to day care, welfare and development or
  • aged 16-21 and wholly or substantially dependent on their parent and does not earn more than $6,043 in a financial year

According to a spokesperson for the Assistant Treasurer, both ex-partners of the same children can apply for this scheme, you will need to demonstrate some care or custody of the children. 

Income tests and property price caps will apply - the caps vary across the states and territories, as set out below:

State / Territory   

Capital City / Regional Centres 


Rest of State / Territory 


























Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a cu
rrent scheme applies.   


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