The Treasury Laws Amendment (2021 Measures No. 4) Bill 2021 has now passed both houses, providing employers with an exemption from FBT if they provide training or education to a redundant, or soon-to-be-redundant, employee for the purpose of assisting that employee to gain new employment.
The exemption will not extend to retraining provided under a salary packaging arrangement or to costs for which an income tax deduction is specifically denied, including Commonwealth-supported places at universities or repayments towards Commonwealth student loans.
The measure will cover a variety of redundancy scenarios, including where an employee is made redundant in one part of the employer’s business but is able to be redeployed to another part of its business. It also covers circumstances where the employer reasonably expects the employee to be redundant but has not yet been made redundant.
Making the announcement in last year’s federal budget, the government hopes the measure will provide an incentive for employers to help their staff transition to their next career.
The Institute of Public Accountants general manager of technical policy, Tony Greco, said that while the move was positive, further changes to expand tax deductions to education and training unrelated to an individual’s current job was necessary to bring equity to the tax system.
“[The new FBT exemption] discriminates against individuals who work for employers who do not have the financial capacity to undertake such activities,” said Mr Greco.
“Current income tax rules discourage individuals from engaging in reskilling and retraining by not allowing a deduction. It takes away the potential benefits of our human capital and therefore our productive capacity.
“With limited ability to source skilled labour from overseas, reskilling our labour force is important, as skill shortages are becoming commonplace as our economy starts returning to pre-COVID levels.
“Now that the FBT impediment has been addressed, the income tax restriction remains.”
Targeted CGT exemption for granny flats
The bill also ensures a CGT event does not happen on entering into, varying or terminating a formal written granny flat arrangement providing accommodation for older Australians or people with disabilities.
To access the exemption, the individual having the granny flat interest must have reached pension age or have a disability. The arrangement must be in writing and must not be of a commercial nature.
The measure comes after the Board of Taxation completed its review of the tax treatment of granny flat arrangements in 2019, recommending that the government provide an exemption for all CGT events that are hypothetically capable of applying to granny flat arrangements.
Low and middle income tax offset
The passage of the bill also extends the operation of the low and middle income tax offset to cover the 2021–22 financial year.
The LMITO provides individuals with taxable incomes between $48,000 and $90,000 with a maximum offset of $1,080. Taxpayers earning less than $37,000 will see a benefit of up to $255.
It was first announced as a temporary measure in the 2018–19 federal budget and was meant to be removed when stage two tax cuts kicked in on 1 July 2020, but was retained in the wake of COVID-19.
The LMITO was then extended for one more year in May’s federal budget as Treasurer Josh Frydenberg stressed the need to further stimulate the economy. The latest extension will come at a cost of $7.8 billion.