Federal Budget 2020-21 - What it means...
The budget handed down on Tuesday 6 October 2020 will be recorded in history as a once in a generation Budget, reported with comparisons not seen since WWII. Business is at the heart of this recovery budget. The measures announced support investment, business tax cuts and the creation of jobs.
There is no avoiding the record deficits for 2020-21 and the forward estimates that see Australia facing debt that will take decades to repay. The Government is very clear in its budget plan in that it hopes that by providing tax cuts, fast-tracking infrastructure projects and introducing other incentives, Australians will assist in speeding up the recovery by spending.
Here is a summary of what the budget means for you.
For Business
Any business with a turnover of less than $5 million will be able to write off the full value of eligible assets. For businesses that need new equipment or would like to upgrade, this is an incentive to bring forward these purchases.
The Government will also allow companies with turnover of up to $5 billion to offset losses against earlier profits. Losses incurred to June 2022 can be offset against prior profits made in or after the 2018-19 financial year to generate a refund.
Businesses are encouraged to retrain or re-skill employees who are moved to a different role in the business, as Fringe Benefit Tax (FBT) will no longer be required on this.
An aggregated annual turnover between $10 and $50 million will give your business access to up to 10 tax concessions. These include an exemption from FBT on car-parking and work-related equipment such as laptops and phones provided to employees.
Jobs for the Young (16 - 35 years)
Incentives to hire young people, especially between the ages of 16 and 35 years will be provided with aJobMaker hiring credit paid for up to 12 months. If you hire someone under 30 you will be paid at the rate of $200 a week and for someone between 30 and 35 years old, a $100 credit will be available. To receive these credits, new employees must work for at least 20 hours a week. For at least one of the previous three months at the time of hiring they must also have received a Jobseeker payment, youth allowance or parenting payment.
Apprenticeships and Traineeships
The Government will provide an extra 100,000 new apprenticeships and traineeships at a cost of $1.2 billion. Businesses will be offered a 50 per cent wage subsidy for every apprentice they hire.
Women
There will be an increase in grants for the Women’s Leadership and Development program along with an increase in co-funded mentoring grants for women-funded start-ups. Study and work-integrated learning experiences and support for women and girls to gain STEM skills will also be funded.
For Individuals
If you are a Taxpayer, stage 2 of the tax cuts due to begin 1 July 2022 has now been brought forward to this financial year. The 19% threshold will rise from $37,000 to $45,000 and the 32.5% threshold from $90,000 to $120,000, putting money back into your pocket. For example, if you earn $50,000 a year you will get an additional $1080 back; $90,000 will get $1215 back. Those on more than $120,000 will benefit even more, with $2565 back. Once the legislation is passed, these tax cuts will be backdated. This means if you are employed, the amount of tax taken out of your pay will reduce. Self-employed individuals will have a reduction in the amount of tax they are asked to pay under the pay-as you go system.
Low- and middle-income earners will continue to receive the Low and Middle Income Tax Offset. Combining this with the new tax cuts could mean dual income families will be entitled to receive up to $5490 back and singles up to $2745.
If you are a receiving a pension or government payment such as a carer’s allowance or disability support payment, you may be eligible to receive an additional $500 bonus paid in two $250 payments in 2021.
Superannuation
A comparison tool known as “YourSuper” will be established to monitor investments by Superannuation funds. Super funds will also need to meet an annual performance test. Australians will now automatically keep the same Super fund when they change employers.
Thinking of University?
Support for 50,000 short online courses to provide upskilling alternatives will be introduced along with an extra $299 million provided to fund 12,000 more undergraduate places.
Health & Welfare
Funding for an extra 23,000 home care packages for the elderly was announced with a promise to provide additional investment after final recommendations have been received from the Royal Commission into Aged Care.
The NDIS will receive a $3.9 billion boost.
More funding for mental health, giving access to 10 extra Medicare rebated psychology sessions, i.e. doubling the current number. There will be additional funding to Lifeline, Headspace, Beyond Blue and Kids Helpline.
Medication costs will decrease together with the listing of additional drugs to the Pharmaceutical Benefits Scheme (PBS).
First Homebuyers
If you are buying a brand new home, the First Home Loan Deposit Scheme has been expanded. It will allow you to borrow with only a 5 per cent deposit as well as avoid lenders’ mortgage insurance. The value of the purchased property has also been increased.
In addition
Investment will be made into supporting our farmers and assisting them to prepare for future droughts. Vital water infrastructure including dams and pipelines will be funded, along with support for regional areas. Investment into manufacturing and road upgrades and the fast-tracking of major projects across each State will support 40,000 jobs.
Faster access to the internet will be provided with an extra $4.5 billion for the NBN and another $29.2 million to fast-track the rollout of the 5G network. Cyber security has also been supported along with funding for research and development, especially in renewable technologies.
What has been announced is a stimulus budget aimed at reducing taxes and creating jobs. There are always winners and losers when a budget is handed down but this budget is aimed at small business, young people and taxpayers, in particular those who earn under $120,000 p.a. and small to medium business owners with a turnover under $5 billion.